Sedgwick County disputes Wichita proposal for shifting sales tax revenue

City officials may have to lobby the state Legislature if they want more sales tax revenue from Sedgwick County.

Wichita Mayor Jeff Longwell and City Council member Pete Meitzner suggested last week a shift in how the countywide 1-cent-on-the-dollar sales tax revenue is distributed among the cities and unincorporated areas of Sedgwick County.

They want the county to give more money to Wichita or a change in state law that would exempt the county from the state’s formula for distributing tax dollars.

But county staff do not feel warmly about changing the current distribution.

“Unless the state law is changed, we recommend to you … to continue to follow that distribution,” acting county manager Ron Holt told commissioners at a Tuesday staff meeting.

The two city officials say the city receives less money than its residents, who make up about 76 percent of the Sedgwick County population, pay in sales tax. They say the city of Wichita generates $77 million in taxes, but it gets back $59 million in revenue.

The county sees that as a “flawed” assumption, Holt said.

County’s ‘side of the story’

Holt said connecting a city’s population to the sales tax it pays is a little more than a guess.

“Sales tax revenue paid is not tracked to a ZIP code or to a household or taxpayer,” Holt said. “All the sales tax collected by businesses in Sedgwick County is sent to the state and aggregated in a distribution back to Sedgwick County.”

Holt also said the city is not accounting for sales tax money that comes from what out-of-county visitors spend when they shop, dine or visit attractions in Sedgwick County.

“Clearly, this would skew all the numbers differently,” Holt said.

The county’s share of the sales tax revenue, $27.5 million in 2014, goes evenly to reduce property taxes and pay for county road and bridge projects.

Holt said Wichita residents benefit the most from $14.7 million the county is projected to receive in 2016 for lowering property taxes.

Public Works director David Spears said the growth of Wichita since the 1980s means the county did work on roads and bridges that are now in Wichita city limits.

“We did a lot of projects in there,” Spears said, adding that county staff are trying to determine how much of the county’s sales tax money was spent over the years on roads that are now in the Wichita city limits.

Holt also said a great share of the county-wide services, such as mental health care, health services, aging services, correctional facilities and emergency medical services, “are used predominately by city of Wichita residents.”

Most commissioners said it was a good idea to start a public discussion that includes the county’s point of view.

The city officials’ “arguments have gotten quite a bit of attention but the other side of the story has not,” commissioner Jim Howell said.

“Our property tax and sales tax from this formula are used to benefit all county citizens, 76 percent of which live in Wichita,” Howell said. “So they receive way more from us in our spending.”

But commissioner Dave Unruh cautioned against overreacting to Meitzner and Longwell’s suggestion.

“I’m reluctant to think that we should get too mobilized and defensive on this thing,” Unruh said.

He said a debate over sales tax redistribution could devolve into a divisive argument that pits governments and communities against one another.

“Our services are beneficial to folks in Sedgwick County, whether they live in Viola or whether they live in the city of Wichita,” Unruh said. “We provide those services without checking IDs and seeing where you live.”

“This conversation for our community is not going to be helpful.”

‘Glaring gap’

The tax, 1 cent on every dollar spent, was approved countywide by voters in 1985. The state has a formula that determines how sales tax revenue is distributed.

Meitzner, the City Council member, said it’s probably time to look at a more fair distribution after 30 years with the sales tax.

“There’s a glaring gap that could be balanced,” Meitzner said.

Meitzner said that he and Mayor Longwell, who is in the Wichita sister city of Tlalnepantla, Mexico, have not proposed anything official to the City Council or the Sedgwick County Commission.

“All we did was show them how there was an imbalance in the distribution of the Sedgwick County sales tax,” said Meitzner, referring to a recent meeting with commissioner Karl Peterjohn and chairman Richard Ranzau.

Meitzner said the city of Wichita should get the sales tax revenue its businesses generate, even if it comes from out-of-county residents.

“Everything that’s generated in the city of Wichita is Sedgwick County sales tax that the city has earned by having people spend money,” he said.

Meitzner said they were looking at all options, including changing state law. But they have not proposed or crafted a bill they would lobby for in Topeka.

Howell and other commissioners worried that tampering with the state’s formula would have rippling effects outside of Sedgwick County.

“That option potentially doesn’t apply to just Sedgwick County but might affect the whole state,” Howell said.

But Meitzner said there’s no reason for that to happen if the city seeks an exemption to the formula.

Riley, Johnson, Montgomery and Phillips counties have exemptions from the formula, according to Sedgwick County spokesperson Jill Tinsley.

Peterjohn said he thinks the formula has the “perverse” effect of encouraging cities to keep property taxes higher to get back more sales tax revenue. But other commissioners said the formula works well for Sedgwick County or that they did not want to change it.

“They’re basically asking us to pay them some money to not use the Legislature,” said Howell, referring to Longwell and Meitzner’s suggestion as “ransom.”

Holt said it’s the city’s move if they want a change in revenue.

“It seems more like a concept rather than a full, thought-out plan,” Holt said. “Perhaps we should wait to hear more from the City Council before we do a lot more work on this.”

This story was originally published September 15, 2015 at 12:23 PM with the headline "Sedgwick County disputes Wichita proposal for shifting sales tax revenue."