ANDOVER — You thought the sales tax rate was high when the 1-percent state sales tax increase went into effect Thursday.
Andover residents could vote on Aug. 3 to raise their sales tax rate 1 percentage point more to 8.55 percent for four years, affecting not only residents but also workers, shoppers and students who live outside the 10-square-mile city limits.
This would be a third sales tax rate hike within a year because Butler County and the state raised sales tax rates this year, too.
While the new rate is higher than Wichita's sales tax rate, it would not be the highest in the state. Some areas in Hays, Junction City and Leawood have sales taxes above 10 percent.
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The money raised by the 1-percent Andover sales tax increase would pay for an estimated $4.35 million in bonds to pay for a new city hall building that's already under construction.
But Andover residents face increased taxes to build a city hall no matter what.
If the 1-percent sales tax increase fails, city officials said they will go ahead with their original plan to raise property tax rates by three mills — an additional $69 a year for a $200,000 home — for 20 years.
No matter which form of financing is used, the city will raise property tax rates by 1 mill — about $23 more per year on a $200,000 home — to cover increased operating costs of the new city hall.
Construction under way
As the city waits on the vote, the frame of the 27,000-square-foot structure is quickly rising next to the new Andover library in the city's Central Park area.
The city of Andover awarded a $3.6 million contract to Key Construction in December and broke ground on the project Feb. 10. Completion is expected in late October or early November.
"People are asking why there wasn't a vote to build it," Assistant City Manager Jennifer McCausland said.
Unlike school districts, the city doesn't need to ask voters to raise the mill levy for construction projects.
But the city does have to ask voters to raise sales tax.
Andover's City Hall is currently housed in a 6,000-square-foot space in a building on Andover Road.
An architecture firm outlined the need for a new city hall 10 years ago, said Les Mangus, public works director.
The building was expanded in 2004 to attach the Police Department, but administration offices for 12 city employees didn't change, he said.
McCausland's office is technically a utility closet. She works facing the phone system, her back to the water main.
City Council chambers have little space for large turnout at a meeting, city officials said.
With city administrators exiting the current building, municipal court, held in the chambers, could schedule hearings throughout the day instead of just at night, Mangus said.
City Council members approved the project last fall. mayor Ben Lawrence said.
The idea to offer residents the choice to finance the building with a sales tax came after the success of a 0.75 percent sales tax increase to pay for the new library that opened in 2008, Lawrence said. The sales tax has been stopped, and there's no debt on the library building, he said.
A four-year sales tax would save $3 million in interest the city would have to pay for the 20-year loan.
"As elected officials, we're looking at alternative ways to save tax payers money," Lawrence said.
The sales tax for the city hall would end at the end of four years or when the building is paid off, whichever comes first.
He said council members decided to put the sales tax referendum on the primary ballot because it's well attended — and they need to start selling bonds as soon as possible to pay the bills on the building.
"We're building now, and the sooner we collect taxes, the more interest is saved," Lawrence said.
Support for sales tax
The most visible supporter of the 1-percent sales tax increase is the Andover Chamber of Commerce.
"The issue is not whether (a tax increase) is going to happen," said Denise Kelley, executive director of the chamber. "It's which one has less impact on business."
Businesses and residents would feel the impact of a higher property tax rate for 20 years, but the sales tax would only last four years, chamber president Scott Wilson said.
The three-mill levy increase would mean a business valued at $200,000 would pay about $140 more in property tax a year, if its value doesn't go up.
"For developers in town, a higher mill rate is not a good thing — it increases lease rate," he said. "The sales tax is less of a burden."
Shifting tax burden
A sales tax would shift the burden to a large population of workers or shoppers who don't own property in the city but use its businesses and city programs.
"They utilize our services every day," Lawrence said. "They drive on our roads," which are maintained partly by administrators in City Hall.
Wilson said he didn't think Andover stores would suffer significantly from customers choosing to shop at nearby cities with lower sales taxes. Wichita's sales tax rate is 7.3 percent.
"They may save a few pennies in Wichita, but that's given up in gas," he said.
But visitors who shop in Andover said the increase could make a difference in choosing where they do high-ticket purchases.
"Wichita is not that far away," Whitewater resident Lori Segraves said. "I wouldn't buy groceries here."
Andover homeowner Pat Emerson said a higher sales tax could affect the shopping habits of residents, too.
"You stop at the Dillons on the way home, not the one at home," he said.
Emerson said he thinks the city hall project is needed.
"The timing could have been better," he said. "Make sure the economy was better."
Lawrence said the bad economy worked in the city's favor to receive a competitive price on the construction bid — almost $1 million less than budgeted.
"The city government doesn't have the ability not to provide services," Lawrence said. "The government is meant to be something for everybody."