A recent Kansas Board of Tax Appeals decision could lead to a sizable dent in Riley County’s budget, and that has county administrators concerned.
In that decision, the board sided with Bass Pro Shops in Olathe after the company appealed its assessed property tax valuation, Greg McHenry, county appraiser, told the county commission Monday. The company argued that the store was really worth about 40% less than what the Johnson County had appraised it at, and the board agreed, stating in its decision that hypothetical leased fee value is the best indicator of a property’s value.
The decision sets a precedent and could have ripples on county governments across the state, McHenry said.
“We hadn’t really seen that before,” McHenry said. “It hadn’t gone that far, and that’s a problem from an appraiser’s standpoint. First of all, there is no such thing as a hypothetical leased fee approach. That’s a phrase that they have come up with, and some folks in national media have used. But in terms of appraisal theory, there is no hypothetical leased fee value theory. And a big reason why is because it does not address fee simple market value. In Kansas, we’re mandated to assess value at the fee simple market value.”
Under hypothetical leased fee value and the “dark store theory,” big box retailers across the country have started to appeal their assessed property tax values, arguing that their properties should be assessed based on what similar, but empty, properties have sold for in the region.
McHenry said the county has three “dark store theory” cases before the board later this year. Home Depot is appealing its 2018 assessed valuation of $6.4 million and arguing for a $2.9 million reduction in value, or about 40%, according to McHenry. Since property tax dollars go to the city and school district as well, that would mean those entities would have to refund Home Depot $106,000 in property taxes. That case will be heard June 24.
Manhattan Marketplace, which includes Sport Clips and Noodles and Company, is looking for a 45% reduction, or about $4.2 million decrease in property value, for two tax years. For the 2018 year, that would mean a property tax refund of $158,000, and for 2019, a refund of $173,000. McHenry said the cases would likely be heard in the fall.
Combined, there are $438,000 in tax dollars at stake between the three cases, and McHenry said he wouldn’t be surprised if the county sees more cases, like Hy-Vee and Target, before the end of the year.
“The real story is the $438,000 in valuation that the large companies are now not paying in taxes. The common resident is,” Rich Vargo, county clerk, said. “That’s a shift in taxation from large businesses to the constituents. Previous commissioners used to be always concerned with single-parent families and the elderly. That’s where the mill levy is going to now. We have to get people who are going to vote to realize this is money coming out of their pockets.”
Kansas law says that any appeals that county governments file in such cases have to go straight to the board, which creates a tactical incentive for the companies, because those cases typically take some time to get through, and if the board rules against the county, the county has to pay interest on refunded tax dollars.
County governments have had to evaluate their chances of winning before their cases before the board and decide whether to proceed or cut their losses.
“It used to be one arm tied behind our backs, but now it’s like going with both arms tied,” McHenry said. “It’s definitely not a fair process at all. We feel like we’re creating a constitutionality issue with these decisions, where BOTA is. We’re really creating a separate class of a few properties that are not held to the market value standard. … Is that constitutional or not? I don’t believe so, and I’m not an attorney, but that’s where we’re at.”
One way to fight the companies is for county governments to take the cases to the Kansas Supreme Court and declare hypothetical leased fee value unconstitutional.
Clancy Holeman, county attorney, said the state Legislature could also fix the problem by changing state appraisal law to say that a property’s market value shall not include the property’s hypothetical leased fee.
The first two candidates for Frank V. Bergman principal discussed their philosophies for leadership during a forum Tuesday at the school.
Steve Koch and Heather Calvert answered questions from teachers and parents for about 45 minutes. They are two of the four candidates interviewing for the position. Current principal Lori Martin will retire in July.
Koch currently serves as principal at Lincoln Elementary School in Lincoln, Kansas. He has over 20 years of experience in public education, including serving as an elementary and middle school teacher. He’s taught in Abilene and Salina, and has been principal for the last seven years in Lincoln.
Koch said he is interested in the position because it would bring him closer to his family. He said his children live in Abilene, Bonner Springs, Wichita and Topeka. He also said he misses the diverse schools like the ones in Salina.
“Salina had economic and racial diversity,” he said. “We have a few Hispanic families and a few black families, but I miss it tremendously.”
He said he originally was going to go into forestry when he was in college, but job prospects were low, so he majored in business to take over his dad’s car dealership. Just before graduating, his dad sold the dealership, and Koch eventually went into insurance sales. Once someone told him he would be a good teacher, he changed his path.
Calvert is currently the principal at Indian Hills Elementary School in Topeka. She has served as an elementary assistant principal and classroom teacher.
She said she has taught and served in leadership positions in Topeka since she graduated from K-State, and would love to come back to the area.
She said in her interview she thinks her students and staff would describe her as “a lot of fun.” She said Indian Hills programs like her and the teachers riding the bus home with the kids and starting a school chant have made the school better.
“We always have fun, whether it’s a special day or a pizza party or building community culture,” Calvert said.
Calvert and Koch had similar answers in terms of inclusion of special education students in classrooms and activities, to try and include them “one day at a time.”
However, they differed in their willingness to jump on board with getting a therapy dog for the school.
Calvert immediately said she wants one and the school would just need to follow the guidelines in place.
Koch, who raised hunting dogs when he was younger and wanted a therapy dog at one point, talked about opportunity cost and if the benefits would outweigh the costs.
“You have to know all the student allergies, and if there are students in this wing with allergies, that doesn’t mean you can just put the dog in that wing,” he said. “The dog couldn’t go into the common areas, like the library, the gym.”
He also said he wasn’t sure it was worth having a dedicated teacher or faculty member who would have to take the dog for a walk, care for the dog during breaks and vet care, when the money could just be used on students.
Koch described his principal style as having an open door and letting his teachers teach. He said he didn’t want to micromanage them, but had one request.
“Have an extra worksheet and an open chair and desk in your room because I want to learn what your students are learning,” he said. “At the end, I’ll leave a positive note and maybe something I saw, like ‘I noticed you didn’t ask ‘Johnny’ a question today.’”
He said in doing so, he would also give the teachers the opportunity to explain why, like if Johnny’s parents are getting a divorce and the stress might be too much in the moment.
“I wouldn’t know that,” he said. “You know your students and what’s best for them.”
Calvert said she’s a “very energetic leader.” In her first year, she said she’d mostly observe.
“It’s not my place, especially in the first year, to say what needs changing,” she said. “I’ll figure out what’s going on and why we do things that way.”
Interviews were scheduled to continue Wednesday with Christopher Delforge and Laurie Harwood.
Manhattan residents will vote to accept or reject an increase in the sales tax rate this November. For some city commissioners, that ballot initiative boils down to this: will the city fund its long-term projects or scrap them?
The ballot question, which the commission unanimously approved Tuesday, will ask voters to consider a permanent three-tenths of a percent sales tax increase in November.
With several significant city projects coming in the next seven years, city administrators came to the commission with the increase proposal. Those projects include raising the levee, airport runway reconstruction, Aggieville redevelopments, the city’s contribution to North Campus Corridor, the Joint Maintenance Facility and the Douglass Park recreation center.
Over the next 30 years, project expenses including debt service is expected to cost the city $90.9 million. By increasing the current sales tax rate (8.95%) to 9.25%, city administrators project they’ll be able to raise $99.9 million in revenue over those 30 years to cover the projects.
The city currently receives 1 permanent percentage point of the total 8.95% sales tax rate for general use. The rest goes to the state, county and the city’s special sales tax initiatives for street and parks and recreation improvements.
Although they all voted in favor of posing the question to voters, some of the commissioners were hesitant over the wording of the question. Commissioner Usha Reddi said she thought the question was too vague in saying that resulting revenue would be used for “all lawful expenditures of the city.”
“I don’t want it to be misinterpreted that somehow they won’t have any mill levy increases because we are approving this,” Reddi said. “Notice these are two different things we’re talking about, and so as we move forward with the budget this year and even next year and the next few ... This (sales tax increase) is mainly for the bond and interest. That’s what we’re trying to reduce here, so we don’t have to increase property taxes to go towards these projects or any other projects that are coming up.”
Mayor Mike Dodson asked city administrators if the question could be more specific in its phrasing, particularly in setting an expiration date on the sales tax. City administrators said they were limited in phrasing the question because if the ballot question had more specific language restricting funding to the projects, the city would run into legal issues with allocating the funds.
The city could also face a legal challenge if it seemed like it was trying to phrase the general sales tax question as a special sales tax question, which would require a mandatory “sunset” period of 10 years.
“I guess the fundamental question for me is not between adopting a sales tax and adopting a property tax,” Dodson said. “It’s between adopting a sales tax and not doing these projects. And I don’t know if that’s a legitimate ballot question or not. I understand what we’re asking, but we’re suggesting that these are fait accompli, and that we’re either going to pay for them by sales tax or property tax, and I’m sure everyone agrees that property tax is probably not the way to go.”
Commissioner Jerred McKee said he had a different stance than Reddi. He said he saw the sales tax increase as a question on whether Manhattan citizens would vote to fund future city services.
“I would love those projects long-term, but I’m interested in this more for the long-term fundamentals of where the city is at,” McKee said. “You could stop all spending on outside agencies, all of our payments for various memberships, and you could maybe reduce the mill one year.
“But long-term, unless we were to gut city staff, personnel costs alone are forcing us to raise the mill levy every single year or are going to force us to change the mill levy every year unless something changes with the amount of houses we have on the property rolls, or the amount of sales tax we bring in, and I don’t see either of those things changing drastically in the near future,” McKee said.
Commissioner Wynn Butler said he was in favor of the question, but that he thought the increase as a whole will hinge on the mill levy rate, which the city will set through its budget process this summer.
The city’s current property tax rate sits at 49.355 mills. A mill is $1 in property tax for every $1,000 of assessed valuation. Coupled with the state, county and school district mill levies, the total property tax rate in Manhattan is 148.558 mills.
“To make it crystal clear on the resolution to the voters, if they do not vote for the sales tax, we will not get a recreation center at Douglass Park,” Butler said. “We’d have to scrap it. We’d have to scrap the North Campus Corridor. We’d have to scrap just about all of them, except maybe the levee, because we don’t want to flood the city.”
Commissioner Linda Morse said if the city wants to maintain its reputation as a destination city, it will have to put money behind projects to improve the city’s economy.
“I don’t consider these ‘wants,’” Morse said. “As we talk about what’s wanted and needed. I’m unwilling to pass a property tax that would fund these programs, so for me, it has to be sales tax, and I believe it’s up to us as commissioners to have courage to send this to the electorate, and it’s up to the electorate to make a decision on the funding of it all. If it doesn’t pass, then a lot of other decisions will have to be made, but citizens have made decisions in the best interest of the city in past, and I expect that to continue.”
Dave Colburn said 16 years serving on the Manhattan-Ogden School Board was enough for him.
Colburn did not file for re-election, which means his term will end this January. At the end of his term, he will become the second-longest serving board member in the district’s history, just a year shy of the record.
“We did a lot, we’ve done a lot. I’ve helped hire two superintendents and been through a mascot battle. It’s been quite a ride and it was truly an honor to get to work with the teachers and administrators in this district,” he said.
Colburn started on the board in July 2003. He said he was inspired to run the first time when there was talk of shutting down Bluemont Elementary and Eugene Field Early Learning Center because the district was losing students.
“I didn’t like the plan on how they would move the Bluemont students and the Eugene Field students, so I came up with an alternate plan of where to move the kids that was adopted before I was even on the board,” he said. “That’s when I got the bright idea that I might be of some help and I decided to run.”
He said he’s seen a lot throughout his 16 years, like almost closing Theodore Roosevelt Elementary because of lack of students, but ultimately not because the Big Red One returned to Fort Riley, as well as crafting and passing the 2008 and 2018 bond issues.
Colburn said when he was elected he had two daughters in school and one about to start. Each time he ran again, he was thinking of his children.
“When it came time to run for a second term, I looked down the road and I could hand my oldest a diploma at high school graduation, and that was pretty compelling,” he said. “Then the same thing the second and third time, I could see my second graduating in a couple years, I thought the same thing. It’s a brief moment to hand your child their diploma, but a proud one. All three times it was a factor.”
Each time he was going to run again, the family would sit for a meeting and everybody got a vote. He said he didn’t want it to affect his children in school.
“Every time, they said I should stay on the board,” Colburn said. “Now they’re all out and I think even if I wanted to, they wouldn’t get a say this time.”
There were moments of difficulty, he said, but overall he enjoyed the experience.
“Sometimes, when a situation got sticky, you think ‘Why am I doing this?’ But you get through it and see the great things that come from it and it’s worth it,” he said.
Colburn said he will probably stay involved to some extent with the district, but on “not such a demanding level.”
“Redistricting will be big when it comes around again after the new school is built,” he said. “I didn’t always find it an enjoyable process, but I may volunteer.”