Budget Primer 101

How big is the Topeka city budget? What is a mill? Where does the city get its money from? You have come to the right place.

There is something you need to know about writing for a newspaper. The hard part is getting it past the editor. Basically, if you can explain something simply enough that the editor can understand it, it will be fine for the readers. We spend a lot of time trying to figure out how to explain complex subjects such as tax credits, corporate hog farming and turning on the hot and cold faucets so the editors can understand them.

My assignment today is to explain the Topeka city budget so the editors can understand it. I have chosen the Q&A format as a convenient one, first because editors seem to like it, and second, I can use a lot of the actual questions they have asked me over the years.

By the way, the numbers used here are from the 1999 budget. The financial folks at city hall still were recomputing the new budget for 2000 after Tuesday night's city council action.

For example:B Q. How big is the city budget?/B A. That is sort of like asking how big is Councilman Jim Gardner. Do you mean how tall is he? Do you mean how much does he weigh? Or do you mean how much influence does he have?The total city budget this year was $142.3 million. But a lot of that money was spent in areas that aren't true governmental services. For example, $18.5 million of that money is being spent in the city's water utility, which gets its money from water fees paid by the customers who buy water from the city. The budget also includes other business-like operations such as the sewer utility and parking operation.

The easiest way to identify the "governmental" part of the budget is simply to add together the totals of the five funds that are supported at least partly by property tax, then throw in the special street repair fund because it has been part of the general fund in the past.

The property tax funds are the general fund, general improvement fund, parks and recreation fund, liability expense fund and the general bond and interest fund.

In 1999 those funds totaled $90.6 million. So, even though the government accountants cringe at how we oversimplify things, we call that the city's governmental budget. Remember we have editors we have to get past here.

B Q. What is a mill?/B A. A mill is a mythical creature invented by government accountants so we won't understand what they are doing. When forced to explain it, they say a mill is one-thousandth of a dollar. That means it is a tenth of a cent.

It is just a number that is used to figure out how much property tax you have to pay on your house or on your business property.

No one seems to know why we use mills instead of making cents of it.

Here is how to use a mill levy number: Let's say your house is worth $93,457. Specific examples are always best, aren't they?The first step toward figuring a tax bill is to multiply that value by 11.5 percent. That is because, in Kansas, residential property is assessed for tax purposes at 11.5 percent of its actual value.

The reason the state does that is so that it can assess commercial property at 25 percent and make us homeowners feel like we are getting off easy. No one seems to know why we don't simplify all that by using the actual value of commercial property and giving homeowners a 54 percent discount. It would amount to the same thing and be easier to explain.

Anyway, multiplying the $93,457 by 11.5 percent gives you an assessed valuation of $10,748.

The next step in figuring your tax bill is to divide that number by 1,000. That is because a mill is one dollar of tax on each $1,000 of assessed valuation.

Doing that math brings us down to 10.748 units of $1,000 assessed value in your house(By this point, I assume we have lost the editor, but I will go on with those of you still with me).

Now we are ready to compute the tax bill. Last year a typical mill levy rate in Topeka was 150.708 mills. So, the owner of a $93,457 house in Topeka paid $1,620 in tax (150.708 mills times 10.748 units of $1,000 assessed valuation).

B Q. How important is the mill levy?/B A. The mill levy determines who pays how much in property tax and how much money the city gets from property tax. Actually property tax represents only about 10 percent of the money the city takes in each year to pay for its operations.

The reason you hear so much about the property tax is that it is the most political element of the budget.

The mayor and council members can't do much at budget time in August to increase or decrease sales tax revenue, water fees, sewer fees, utility franchise fees, etc. Not really, although Gardner would have you believe the council can increase sales tax revenue just by wishing it so.

Those revenues sources are all determined by rates set separately from the budget process.

In adjusting the annual operating budget up or down, about all the council has to tinker with in August is the property tax rate.

B Q. Where else does the city get its money?/B A. Dozens of places, is the simple answer. There are swimming pool fees, parking fines, concession stand revenues, building permit fees, franchise fees on utility bills, etc. etc. Historically, property tax has been the single largest revenue source. But this may be the year it falls to second place.

Revenue from the city's 1 percent sales tax has been rising faster in recent years than the growth of the property tax. In 1999 the city is expecting to receive $22.3 million from property tax and $22.2 million from the sales tax.

Copyright 1999
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