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.”