Nikole Babb
nbabb@cherryroad.com

In reaction to the Kansas legislature capping property tax increases at the local level, the City of El Dorado is considering a sales tax increase to reduce the mill levy. The discussion was held at the April 2 El Dorado City Commission Workshop.

City Manager David Dillner introduced the topic of the sales tax, saying it could lower the levy by 14 mills. The City already has a 1% sales tax that goes into the general fund and any excess funds special projects. The City would have to cap their sales tax at 2%, meaning a new tax couldn’t be higher than 1%.

In a graph that compares El Dorado to surrounding cities, El Dorado has one of the lowest sales tax in the area alongside the City of Andover, both at 1%, which excludes state taxes. Augusta, among many other cities like Winfield, Emporia, Haysville, Newton and more, use a local 2% sales tax. Both Andover and Augusta attribute the usage of their sales tax to outside residents coming into those cities to spend their money, which alleviates the residents’ property taxes in turn. The City of El Dorado estimates that about 40% of its sales tax comes from people living outside the corporate boundaries of the City.

“Shifting the tax portfolio to a sales tax allows people visiting El Dorado to pay for public services,” the proposal put together by Dillner reads. “A sales tax provides the best mechanism to lower property taxes without significantly altering public services, such as law enforcement, fire protection, street maintenance, and recreation programming.”

Inside the proposal, Dillner says that the City’s one-cent sales tax generates an average of $3.4 million per year, which is based on the last three years. He projects that a half-center sales tax would generate about $1.6 million per year, which he says could reduce the mill levy by 16 mills. This would mean that the City would need to elect to lower the mill levy by the full amount of what’s generated from the half-cent tax.

This would in turn change the City’s revenue from relying on property taxes to sales taxes. It currently operates on 44% of property taxes as revenue and 22% from sales taxes. This would shift the revenue to 32% property taxes and 44% sales tax. This would include no change to the current sales tax and the addition of a half-cent sales tax.

If the City decides to move forward on this item, it would put it on the November voting ballot. More information will be discussed in future city workshops.