House bill would force Kansas counties to pay businesses for COVID shutdowns

The Sedgwick County Commission is hoping to block a Kansas House bill that county officials say would “punish counties” for trying to slow the COVID-19 pandemic through public health orders. It would force the county to slash spending by a quarter or raises taxes, county officials said.

Under the proposed legislation — HB 2142 — county governments across the state would reimburse property owners for property taxes at any business that “was shut down or limited in any capacity from conducting operations by the county government.”

The bill, introduced in the House Committee on Taxation last week, would cost Sedgwick County as much as $50 million if passed and signed into law. It would also force the county to cut up to 26% of its spending, including law enforcement, roads and bridges, and the zoo, county officials said.

Counties, which receive 20-30% of property taxes, would also have to pay back property taxes collected for the state, cities and school districts. The Sedgwick County Commission says in its letter opposing the bill that the measure would “transfer of wealth from residential taxpayers and some businesses in favor of certain businesses and commercial property owners.”

“Many of the businesses affected by the COVID-19 pandemic received support from Federal tax dollars and there is Federal legislation aimed at allocating more money to them,” the letter says, citing tens of millions of dollars the county allocated under the CARES Act.

“The County focused this spending in an effort to keep businesses open and as an alternative to mandatory closures,” the letter says. “Despite these efforts, this proposed legislation attempts to punish counties that allowed a health officer to impose closures/limitations. It is also inconsistent with the Legislature’s previous position that the County should have ultimate control over whether such limitations by the health officer remain in effect.”

Opposition to the bill was approved by the Sedgwick County Commission 4-1, with Commissioner Jim Howell voting no. Howell said he voted no because he disagreed with some of the verbiage in the letter sent to legislators, not because he agrees with the bill.

His main objection is that it would be applied retroactively, applying to tax year 2020 and future tax years.

“If it were only looking forward to future health orders, I think it would be a good legislation, because it would make counties think more carefully before issuing orders that keep businesses from making money and then impose the burden of government on a business,” Howell said.

Sedgwick County Counselor Mike Pepoon said the bill, which was introduced by Rep. Ken Corbet last week, is unlikely to pass.

“I don’t think we think the bill in its current form is going to go anywhere,” Pepoon said. “But there are going to be other bills coming down probably very similar to this that may be better written and could affect the county in just as adverse a way.”

State lawmakers are looking for ways to compensate businesses for shutdowns after a string of lawsuits were deferred in lieu of legislative action by recommendation of Kansas Attorney General Derek Schmidt.

For businesses that were completely shut down, the county would pay back property taxes for each month the business was closed. Businesses with capacity limitations would be reimbursed proportional to the capacity limits. For example, a business forced to operate at 50% capacity for a full year would receive half-off its property taxes.

It would also apply to strip clubs, restaurants and other businesses shut down by the county for non-COVID reasons, Pepoon said.

“It’s an attempt to thwart any of our attempts to regulate,” Pepoon said. “And our citizens are going to expect regulation, so if they don’t want us to regulate, then they (the state legislature) need to get in the regulation business and leave us out of it.”

Only property owners would be reimbursed under the proposed bill, not businesses operate under a lease.

Kansas counties would be on the hook for reimbursing property owners for property taxes paid during a business shutdown. Payments would be made to property owners — not necessarily business owners — out of the county’s general fund.

Corbet, a Topeka Republican and business owner, did not immediately respond to questions Monday afternoon. The tax committee will hear the bill at 3:30 on Tuesday afternoon.

This story was originally published February 8, 2021 at 3:42 PM.