CLAY COUNTY – Voters casting Clay County ballots in the November election will decide whether the county will drop its commercial property surtax by 15 cents per $100 of assessed valuation from $1.59 to $1.44.
Proponents of the measure, called Proposition A on the ballot, say doing so will make the county more competitive in the development landscape while those opposed say it will create funding losses to taxing jurisdictions like school districts and emergency services.
History of Prop A
According to County Assessor Tracy Baldwin, the idea to ask voters to drop the surtax came after he discussed the number of calls questioning what the tax his office receives from area business owners with the county commission and auditor. Baldwin said he began looking into the surtax prior to 2020.
“I noticed there were calls, a lot of calls, and what they would ask about was what the surtax was. Our commercial guys in here didn’t have a real good answer. It was a tax the state put on commercial properties, was kind of the details that was given. I did a little more research and … come to find out, it was an outdated tax from 1985 to replace the inventories,” Baldwin said. “When we have values go out at the beginning of the year, we have businesses call in … and almost every single business asks ‘Why do I have to pay this surtax?’ So I felt it was my duty as an elected official to listen to my taxpayers and that’s why I brought it up to the commissioners and the auditor.”
Baldwin said roughly eight of 10 calls his office receives in a day from commercial property owners question the surtax rate, adding complaints aren’t from large businesses or developers, but small businesses.
“I know that North Kansas City has put out some stuff that it’s only helping big businesses, but not one of our big businesses asks about this. It’s all the small businesses,” the assessor said. “Most of the big developers are getting some kind of tax abatement or a TIF or it’s the lease type and tenant pays that tax. Most of the big developers push those tax payments to the tenants the way it’s set up in the lease.”
Baldwin said he “is for” Prop A.
“I’m for it because part of my responsibility as an elected official is to listen to taxpayers,” he said.
What is the commercial property surtax?
Clay County Auditor Victor Hurlbert said the county’s commercial property surtax is the highest in the Kansas City metro area and third highest in the state behind St. Louis county and city. Dropping the tax rate to $1.44 per $100 of assessed valuation, he said, would make it the same as Jackson’s County surtax rate.
“Surtax, really, is just an additional tax on commercial property,” he said, adding the rate has not changed, as Baldwin said, since 1985. “It’s a subset of commercial taxes.”
Overall surtax revenues to the county, the auditor said, are $17 million out of about $500 million in property tax revenues.
“It’s roughly 3.4% of total property tax revenues,” Hurlbert said, adding about 20% of the county’s total assessed valuation comes from commercial property.
What other taxing entities say
If Prop A passes, some taxing jurisdictions impacted will see a loss of needed revenues, representatives from local cities and school districts told the Courier-Tribune. In addition to the county government, cities in the county, public schools, Clay County Public Health, Liberty Hospital, Mid-Continent Public Library system, Synergy and Tri-County Mental Health Services, cities’ fire and EMS services and road districts receive tax revenues.
“A pass would be a cut of more than $700,000 from the district’s budget. It could have significant impact on the services we provide to our 21,000-plus students,” said Susan Hiland, director of media and public relations for North Kansas City Schools district. “As Clay County has grown, so has our district. We are now the second largest school district in the state. Reducing funds means we will need to serve more students with less.”
Hiland said while the proposed cut would only impact less than 4% of all real estate parcels, passage of Prop A would affect budgets of numerous taxing jurisdictions in Clay County.
“This loss of funding could eventually mean asking for a tax increase to meet needs throughout the county, with residents making up the shortfall. The surtax currently supports many of the services citizens depend on such as fire, police and schools,” she said. “At a time in which needs are great, Proposition A proposes cuts for schools and community services.”
North Kansas City Mayor Bryant DeLong wrote a letter to the editor to the Courier-Tribune, saying he is against Prop A.
“Proposition A would hurt the families and small businesses of Clay County by defunding our high-quality schools and public services such as police, fire, infrastructure, mental health services, roads, public health, libraries and more,” he wrote. “I will be voting ‘no’ on Proposition A as it will cut approximately $750,000 in funding to my children’s school district and over $84,000 in funding to the police, fire, parks and library that serve and protect my family in North Kansas City.”
Dallas Ackerman, communications director for Liberty Public Schools, said for the current fiscal year, LPS would realize a reduction of $170,000 in revenues if Prop A passed.
“The district voiced its concern that additional study was needed by the Clay County commissioners to have a more collaborative approach and complete understanding of how the ballot measure would impact taxing jurisdictions,” he wrote in an email to the Courier-Tribune.
According to Smithville School District, if Prop A passes, it would see a revenue reduction of $5,000 to $10,000 per year based on assessed valuation totals. In Kearney, according to the city administrator, the reduction would be about $22,000 per year to the city and $21,500 to the school district based on current valuation estimates. Mid-Continent Public Library expects a revenue decrease of about $100,000 each year, according to Jim Staley, community relations and planning director.
“For us, for the very first year, it would be around $100,000,” Liberty City Administrator Curt Wenson told the CT. “But I think what’s important for readers to know, is that is year No. 1. If we have any more development to occur in the future, the deficit will get bigger.”
“It’s hard to do more with less, especially when residents demand good services from the county and municipalities,” said Kearney Mayor Randy Pogue, adding as mayor and a local banker, he hasn’t heard of one business or developer choosing not to come to Clay County as a result of the surtax rate.
“I think it’s interesting that this is the approach. If it’s really about providing tax relief and really about looking at ways to be more competitive and attract more business even though we are already one of the fastest growing counties in the state, I think there’s other ways we can go about it,” he said. “They can rollback levies and provide relief to every county resident and not just a select industry, so I continue to have hard time understanding and agreeing with how they are trying to provide tax relief and making sure that Clay County continues to grow.”
Smithville Mayor Damien Boley said like Kearney, the overall impact to his city would be minimal if Prop A passes and he also has not heard of a developer who overlooked the county or Smithville as a result of the county commercial property surtax rate. The county, he said, could do more to aid economic development and negative impact to business owners across the county.
What county commission candidates say
In the race for seats on the expanded county commission, candidates for the western at-large seat are at odds over their support of Prop A. Ken Jamison said he thinks the cut is fair, while Jason Withington said he is voting against the measure. In the race for eastern seat 2 on the commission, Sherry Duffett is against Prop A and Jay Johnson said he supports the measure, but it doesn’t matter to him if it passes as the amount of money involved is minimal. Incumbent Presiding Commissioner Jerry Nolte is in favor of the ballot effort. His opponent on the November ballot, Dan Troutz, declined to be interviewed.
Eastern at-large commissioner candidate JoAnn Lawson said she supports Prop A as it’s a way to provide relief to small business owners. Her opponent, Steve Wolcott, said he has concerns about Prop A because it will have a negative economic impact as will the recent county decision to rollback the general tax levy on county services and facilities.
Auditor says Prop A would be revenue neutral
While some taxing entity representatives are concerned over potential revenue reductions, Hurlbert contends if passed, Prop A, would be revenue neutral if new construction is not taken into account based on historical valuations.
With expected growth coming in as new construction, Hurlbert said decrease in surtax is expected to be offset by growth, meaning the county could see increased revenues despite the rollback.
“When you look at fiscal impacts to property tax revenues due to a levy change, you have to take into consideration assessed valuation because that’s what you’re taxing. It’s like an income tax, it’s all relative to the amount of income that you’re taxing,” he said, adding he reviewed the average assessed valuation growth rate on commercial real estate going back to 1998 as part of an audit. “… That surtax, in a silo, is only a portion of county revenue.”