Keating Report: 2014 forecast on government budgets and spending—Part 4

“Fragile fiscal health” was at the top of the list in the National League of Cities’ (NLC) “10 Critical Imperatives Facing Cities in 2014” report. The NLC analysis notes, “After seven years of declining tax revenues, cities report their fiscal health is on the mend. But cities continue to confront the prolonged effects of the economic downturn and remain vulnerable to cuts in federal funding.” Many cities, the report explains, are being forced to operate with reduced work forces and service levels. In 2014, cities will be searching for new ways to generate revenue, says the report.

In Olathe, Kan., for instance, city administrators saw a need for more revenue to pay for street maintenance. Last July, Olathe City Manager Michael Wilkes discussed the current street funding challenge with the Olathe City Council and outlined why it should be addressed sooner rather than later. Wilkes said, “The bottom line is, if we don’t begin funding our street maintenance at a significantly greater level, in 10 years or less, our taxpayers will be paying at least 10 to 15 times what is needed today for streets.” 

Wilkes added, “It is our responsibility to make sure we don’t create that major burden for ourselves and future taxpayers, if we can avoid it.”

According to Olathe city staff estimates, an additional $9.26 million per year (average) is needed to adequately fund street maintenance over the next 10 years. Without the additional funding to pay for critical repairs, the cost of patching up unmaintained streets will increase exponentially. The city currently maintains more than 1,200 lane-miles valued at more than $1 billion.

Wilkes said city staff had been evaluating this issue for several years, and ultimately came to the conclusion that asking voters to consider a sun-setting street maintenance sales tax was the most responsible approach. “The council has the ability to increase the millage rate, but that rate increase only applies to our property owners, not to all the people using our streets, including the many thousands who live outside Olathe,” said Wilkes. In addition, a dedicated Street Maintenance Sales Tax ensures that all money collected must be used only for the street maintenance projects outlined in the ballot (per state statute).  

According to Wilkes, the funding shortfall would be adequately addressed by a combination of the sales tax and the city’s continued commitment to increase general fund cash contributions to the program. He said, “This issue will not be solved by just passing the sales tax, but also by increasing city operational fund commitments and continued belt-tightening.”

If voters approved the sales tax proposal, Olathe would join the majority of other Kansas City-area larger cities that have implemented a sales tax to fully or partially fund street maintenance.

And that’s what happened. Olathe’s streets maintenance got a shot in the arm when 57 percent of voters approved a 10-year, 3/8th-cent sales tax in November 2013. The winning sales tax issue will make up for part of the shortfall in Olathe’s street maintenance funding. On April 1, 2014, the sales tax collection begins. On March 31, 2024, sunset provisions take place that end the street preservation sales tax.

Wilkes offered this advice to GPN readers on requesting more help from taxpayers: “I’d say the most important issue is to be clear, open and honest with the voters and then ultimately to trust them. The infrastructure belongs to them; the money to pay for it belongs to them.  If it’s the right thing to do, and they have enough information to make an informed decision, they will make the right choice…even if the issue doesn’t pass.”

Olathe city officials are cautious as 2014 gets underway. “We are optimistic that revenues in 2014 will be somewhat better than 2013, however, we continue to take a ‘slow back in’ approach to expenditures,” Wilkes told GPN.

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