Hays sees sales tax increase

By ERIC W. NORRIS

Hays Daily News

Over the course of last year the Hays city manager and the city commission put together a plan to change the basic way in which the city finances its general fund.

Instead of pooling money in the fund from city property taxes, the city eliminated that tax and raised the sales tax within the city limits.

It began as an idea and took a vote by the residents of Hays during the August primary election to make it a reality.

On Aug. 3, 31 percent of registered voters in city limits hit the polls and passed a tax reform program by an almost 2:1 margin.

This action brought about the implementation a 0.75-percent sales tax increase that began the first of the year to support the city's general fund, effectively eliminating the city property tax previously used for that funding.

The result is a new sales tax of 7.05 percent and an approximate one-third cut in in current city property taxes paid by residents.

The 2005 budget has already been set and property owners will see the decreased property tax reflected on their November 2005 bill. The projected budget for 2005 was set using a 3-percent increase in sales tax revenue.

According to City Manager Randy Gustafson, sales tax revenue to date is up 4.66 percent over last year.

Gustafson said the first year's sales tax will go into a “rainy day” fund called a budget stabilization reserve.

“The sales tax collected during the first year is being put into a line item and held as a reserve,” Gustafson said. “The goal is to maintain at least 25 percent of the general fund budget.”

The reserve is established in order to curb the effects of a potential economic slump and consumer spending decrease.

“This funding system is based on the economy,” Gustafson said. “In the event the economy goes south, we will have this reserve and if necessary we could use a potion of it so we won't have to cut the city's services or jobs.”

The general fund provides money for such services as parks and playgrounds, the police and fire departments, as well as the city's administrative costs.

The benefit for property owners under the new tax reform is obvious; the city cannot raise the levy against property tax without lifting the reform by another vote by Hays residents.

During the proposal stage of the tax change last summer, concern was raised about consumer confidence.

However, Mayor Sunell Koerner, owner of Hays City Mercantile, is confident the new sales tax will prove beneficial to those who come to Hays to shop.

“The money that is collected from the sales tax will go back in to community in ways that everyone, not only residents, can enjoy,” Koerner said. “Keeping our streets in shape and having nice parks, I think, will help draw people in. Those services help bring in shoppers and that shopping will help the services we can provide.”

A sales tax rate of 7.05 percent puts Hays on the level with Garden City, Great Bend, Hutchinson and Salina. The sales tax rate in Wichita is 6.3 percent.