County seeking $1.1 million for 2003 budget
Leavenworth County commissioners, reeling from a $1.1 million reduction in funding from the state to finance this year's budget, are looking for ways to raise taxes to cover the revenue shortfall.
"Now the state is not going to pay any of those monies and we're basically a million short to run the county this year," said Steve Wagner, a Leavenworth accountant with whom the county contracts.
But months ago, commissioners set the tax levy to finance the 2003 county budget. So they can't come back to taxpayers.
Or can they?
Employing a little-used process, the county can levy taxes next year to make up this year's $1.1 million reduction in money from the state. The process, called issuing no-fund warrants, essentially allows the county to sell warrants that it would have to pay back within a year.
No-fund warrants are used when public entities have unforeseen revenue losses or expenditures.
According to Wagner, the loss of state funding should qualify Leavenworth County for the warrants.
He said the county would levy enough property taxes next year to repay the warrants. Wagner estimates it would take 3 mills to raise $1.1 million.
A mill is $1 in taxes for every $1,000 in assessed property valuation.
And Wagner cautions that it's unlikely the state's budgetary picture will improve soon.
So the county -- which, again, had been expecting about $1.1 million from the state to shore up its 2004 budget -- will have to increase the levy by another 3 mills.
"Let's say we maintain the existing programs, we're looking at a 3-mill increase to fund those because we're missing $1 million next year, too," Wagner said. "If everything remained exactly the same, you could be looking at a 6-mill increase. What can you do? Commissioners have some decisions they've got to look at. What are they going to do? I'm not sure at this point."
Wagner said that to issue the warrants, which oftentimes are purchased by banks, the county must receive permission from the Kansas Board of Tax Appeals. In addition, the law provides for a protest period.
The tax appeals board conducts a hearing, and likely would rule within a week, according to Tony Folsom, executive director and general counsel for the board.
"They know on these issues they have to act quickly," Folsom said.
He said the board acts on only a handful of applications each year. Last year, for example, the board received seven requests: one from a public wholesale water district, two from counties, one from a community college, one from a township and two from school districts.
So far this year, the board has received two applications from Elk County, one from Rooks County and one from a school district.
"So far, we haven't really seen more applications than we typically do," Folsom said, when asked if the state's economic woes are forcing more governments to turn to no-fund warrants.
Wagner said the county has not yet formulated its application, but he anticipates asking for the full $1.1 million.
"I think at this point, not knowing what the weather holds, what the year holds, you would ask for the amount of money that you were shorted by their government," he said. "Then the following year, if we were able to guide the government through this situation where any of those monies weren't used, they would be applied against the payment of that levy."
Banks or other governmental entities typically purchase the warrants, which Wagner anticipates would pay an estimated 2 to 3 percent interest rate. Because the county would receive the full $1.1 million, if approved by the state, the county would invest the balance it didn't need to operate the county in an effort to lessen the sting of borrow costs.
"It would be due a year from the date it's issued," Wagner said. "By the time this whole process happens, it probably wouldn't have an issue date before September."