A school finance plan under development in the Senate threatens economic growth in Wichita, the city of Wichita says.
Senate Bill 251 would prohibit cities from granting property tax breaks to companies for the amount of property tax that goes to education. The prohibition would apply to industrial revenue bonds and economic development exemptions.
That would be a “huge step in the wrong direction,” the city and the Wichita Regional Chamber of Commerce say.
“We believe this portion of the bill would eliminate significant job creation and hundreds of millions of dollars in capital investment from projects currently in the pipeline in south-central Kansas,” Jason Watkins, legislative consultant for the chamber, told lawmakers on Friday.
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Removing such tax breaks would generate an estimated $20 million a year for schools, says the champion of the plan, Senate Majority Leader Jim Denning, R-Overland Park. In total, the bill would increase school funding by $234 million over two years.
Changing the tax break is short-sighted and ignores the jobs, development and growth in revenue that such incentives ultimately produce, said Ken Evans, a spokesman for Wichita. He said the bill’s impact would be “anti-economic growth.”
Wichita has approved projects amounting to $826 million in capital investment for a net gain of 1,886 jobs in 2016 and 2017, Evans said.
Cargill’s new corporate facility, set to be built on the site of the old Wichita Eagle building at 825 E. Douglas, is a prime example. Last month, the Wichita City Council approved an estimated $13.6 million in property tax breaks for the facility.
SB 251 also includes a utility surcharge that would produce $150 million. An additional $2.25 would be charged on residential bills and $10 on commercial bills.
Denning said that including the tax break change, as well as the surcharge, would show the Kansas Supreme Court that lawmakers are serious about funding education. It would also be a more stable funding source than sales taxes, where the pace of growth has slowed.
“That’s a dedicated 20 mills that’s supposed to come to schools. They’ve taken the authority that they can abate that,” Denning said of the tax breaks.
Erik Sartorius, director of the Kansas League of Municipalities, said the tax breaks, or abatements, are a common economic development tool for Kansas cities. Lawmakers are only looking at the tax revenue lost from the abatement, he said, and not at the fact that the incentives are typically used for new construction or expansion.
Most incentives do not abate 100 percent of property taxes, he said, meaning that some additional revenue still will come to schools.
“These are projects that in many cases would not occur but for (the abatements), and if they did not occur, then neither the state, nor the local governments, nor the school districts would be seeing any additional revenue from that,” Sartorius said.
The change to tax breaks is included only in the Senate school finance bill. A House bill approved by a committee on Monday does not alter tax breaks or include a utility surcharge.
Senate Bill 251 remains in a committee chaired by Denning. The committee held hearings on the bill on Thursday and Friday.
Senators had been waiting for the House to take action on school finance. But when the House didn’t immediately debate its bill this week, Denning rolled out his plan.
Lawmakers face a June 30 deadline to enact a new school funding system. The Kansas Supreme Court ruled the current system inadequate in a March decision, citing academic underperformance by a quarter of Kansas students.