1) Tax Lid Bill to be Debated on House Floor

A couple of weeks ago the House Tax Committee worked HB 2212 and passed it out favorably. HB 2212 has property tax lid implications, and should be considered a property tax lid bill in its current form. Click here for HB 2212 Testimony.

HB 2212 appears on its face to be a property tax lid bill. However the proponents of the legislation argue it is merely a bill requiring transparency which requires a vote of a local unit's governing body, and publication in the official newspaper, for the property tax levy in the upcoming year to exceed the levy in the current year. This is confusing as existing law already requires that cities publish an ordinance prior to a property tax increase becoming effective for the next budget year.(Although there is currently no publication requirement for those entities passing resolutions.) The danger here is that New Section 1 of HB 2212 (which appears to create a tax lid) could be separated from the existing Section 2, or interpreted by a court as being separate from Section 2, thus creating a permanent property tax lid on local units of government.

Action Requested: It is anticipated that HB 2212 will be debated on the floor of the House next week. An amendment will be offered to delete New Section 1 from the bill (the tax lid part of the legislation). Please contact your House members and ask them to support the amendment removing the unnecessary tax lid language. If the amendment fails, please urge them to oppose HB 2212 as a tax lid on local units of government.

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2) Expansion of the Machinery and Equipment Property Tax Exemption Heard

On Wednesday the Senate Assessment and Taxation Committee continued its hearing on SB 317 which would greatly expand the Machinery and Equipment (M&E) property tax exemption in Kansas to include "trade fixtures." Before a standing room only crowd, a number of opponents testified in opposition to this legislation, including the League. (Click here for SB 317 Testimony). This bill is a mirror image of HB 2501. It should be noted that the proponents have already rewritten the legislation to define "commercial and industrial machinery and equipment" as "machinery and equipment used in any trade or business enterprise or manufacturing or production process for the purpose of producing income or profit." This change is intended by the proponents to include "trade fixtures" which would greatly expand the current M&E property tax exemption under Kansas law. The Senate Tax chair asked the parties to get together and try to find common ground on this issue and the League's participating in that discussion.

Action Requested: Both SB 317 and HB 2501 remain in their respective tax committees. Please contact members of those committees and urge them to not expand the M&E exemption and to keep the bills in committee.

Senate Assessment and Taxation Committee Contacts:
Chair
Sen. Les Donovan, Les.Donovan@senate.ks.gov, 296-7385

Vice Chair
Sen. Pat Apple, Pat.Apple@senate.ks.gov, 296-7368

Ranking Minority Member
Sen. Tom Holland, Tom.Holland@senate.ks.gov, 296-7372

Members
Sen. Terry Bruce, Terry.Bruce@senate.ks.gov, 296-7300
Sen. Anthony Hensley, Anthony.Hensley@senate.ks.gov, 296-3254
Sen. Dick Kelsey, Dick.Kelsey@senate.ks.gov, 296-7367
Sen. Jeff King, Jeff.King@senate.ks.gov, 296-7398
Sen. Garrett Love, Garrett.Love@senate.ks.gov, 296-7359
Sen. Julia Lynn, Julia.Lynn@senate.ks.gov, 296-7382
Sen. Bob Marshall, Bob.Marshall@senate.ks.gov, 296-7370
Sen. Dennis Pyle, Dennis.Pyle@senate.ks.gov, 296-7379

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3) House Tax Plan (HB 2747) Would Impact Transportation Funding

The House Tax Committee held two days of hearings on HB 2747, the "House Tax Plan" on Wednesday and Thursday of this week. The general thrust of the House Tax Plan is the reduction of individual income tax rates to zero over time followed by the reduction of other income tax rates to zero. The bill proposes to support the buy down of income tax rates by deferring nearly $160 million in FY 14 and more than $190 million in FY 15 from the Department of Transportation. The bill would provide for the restoration of these funds in the out years. Even if the funds are restored as proposed, the reduced revenue flow in FY 2013, 2014, and 2015 would result in project delays and increased costs.

As stated in our 2012 Statement of Municipal Policy, "We support the continued funding of the Kansas T-WORKS Comprehensive Transportation Program. We oppose any further use of these funds to balance the state general fund budget. Any reduction in T-WORKS funding would jeopardize existing programs."

The League and numerous others testified in opposition to HB 2747. Click for HB 2747 Testimony. The League strongly opposed the use of highway program revenue to replace lost state general funds due to changes in statewide taxing policies. The committee has not indicated when it may work the bill, but we feel certain that it will be worked.

Action Requested: Please contact the committee members (see below) and tell them of your opposition to the reallocation of highway funds and request that they oppose passing the bill out of committee.

House Taxation Committee Contacts:
Chair
Richard Carlson, richard.carlson@house.ks.gov, 296-7660

Vice Chair
Rep. Marvin Kleeb, marvin.kleeb@house.ks.gov, 296-7680

Ranking Minority Member
Rep. Nile Dillmore, nile.dillmore@house.ks.gov, 296-7698

Members
Rep. Steve Brunk, steve.brunk@house.ks.gov, 296-7645
Rep. Terry Calloway, terry.calloway@house.ks.gov, 296-7677
Rep. Jim Denning, jim.denning@house.ks.gov, 296-7665
Rep. Owen Donohoe, owen.donohoe@house.ks.gov, 296-7695
Rep. Stan Frownfelter, stan.frownfelter@house.ks.gov, 296-7648
Rep. Sean Gatewood, sean.gatewood@house.ks.gov, 296-7648
Rep. Mario Goico, mario.goico@house.ks.gov, 296-7663
Rep. Gary Hayzlett, gary.hayzlett@house.ks.gov, 296-7640
Rep. Dennis Hedke, dennis.hedke@house.ks.gov, 296-7699
Rep. Kasha Kelley, kasha.kelley@house.ks.gov, 296-7671
Rep. Melody McCray-Miller, melody.mccray-miller@house.ks.gov, 296-7687
Rep. Eber Phelps, eber.phelps@house.ks.gov, 296-7691
Rep. Larry Powell, larry.powell@house.ks.gov, 296-7694
Rep. Willie Prescott, willie.prescott@house.ks.gov, 296-7686
Rep. Don Schroeder, don.schroeder@house.ks.gov, 296-7500
Rep. Scott Schwab, scott.schwab@house.ks.gov, 296-7632
Rep. Sharon Schwartz, sharon.schwartz@house.ks.gov, 296-7637
Rep. Caryn Tyson, caryn.tyson@house.ks.gov, 296-6838
Rep. Brian Weber, brian.weber@house.ks.gov, 296-7644
Rep. Kathy Wolfe Moore, steve.brunk@house.ks.gov, 296-7687

4) Utility Rate Bill Tabled

Earlier this week, the House Utilities and Environment Committee held a hearing on HB 2661. This legislation would have prohibited cities from utilizing any part of their rate revenue from various utilities for other purposes. In essence, cities would not have been able to transfer surplus from utility funds to the general fund. In addition, payments in lieu of taxes from utilities would have been affected.

LKM, along with Kansas Municipal Utilities and a number of individual cities, opposed this legislation.Click here for HB 2661 Testimony. On Thursday, the Committee worked the bill and considered two amendments which were defeated. Ultimately, the Committee voted to table the bill which hopefully will end this issue for the session. We will let you know if bill pops up again.

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5) Solid Waste Proposal on Hold

The House Local Government Committee took testimony on Tuesday regarding HB 2639. This legislation would have been a serious impediment, and in many cases a prohibition, on cities and counties being involved in solid waste collection. In addition to the serious infringement upon home rule and local control, this legislation was fraught with numerous technical problems. LKM, the Kansas Association of Counties, and a number of individual cities offered testimony in opposition. Click here for HB 2639 Testimony.

The Committee chair indicated at the beginning of the hearing that he does not intend to work this legislation this year. However, it is important to note that proponents are continuing to push for action in this area and the issue could certainly still be dealt with as the session moves forward. Stay tuned to see if this issue comes up again.

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6) Immigration Bills Heard

This week most of the immigration bills that have been introduced were heard. Wednesday and Thursday, HB 2492, HB 2576, HB 2577, and HB 2578 had hearings in the House Federal and State Affairs Committee. LKM opposed all of those bills on the basis that they are unfunded mandates, and create the potential for litigation and liability. In both the Senate and House Federal and State Affairs committees, two bills, SB 399 and HB 2603, which are sometimes referred to as the "Coalition Bills," were heard. These would create a work authorization program for some individuals unlawfully in the country. LKM has no position on these bills and did not be testify.

The fate of these bills is unclear at this point in time. There were numerous groups who testified in opposition, including quite a few from business and agricultural interests. Any city that would like input on these bills should contact its legislators.

7) HB 2084 City-County Consolidation Worked

The House Local Government Committee worked HB 2084 this week regarding city-county consolidation. HB 2084, as passed out of committee, would establish a permissive process, applicable statewide, for a county to consolidate with one or more of the cities within its boundaries. Although the League has long supported city-county consolidation, it opposes HB 2084 because of the dual vote requirement—the vote to approve consolidation must receive a majority of votes in both the incorporated and unincorporated parts of the county—disenfranchises voters.

Please contact your representatives and ask that them to vote against HB 2084 because of the dual vote requirement.

8) HB 2287 "Sales Tax Holiday" Update

HB 2287 is the sales tax holiday bill which would amend current sales tax exemption law to exempt certain purchases of school supplies, computers, and clothing, as defined within the bill for a "long weekend" in early August of each year. The intent of the bill is to permit low income taxpayers to purchase "qualified items" in preparation for return to school without incurring sales tax. At the initial hearing, LKM opposed the tax holiday because of our long standing objection to legislation that narrows the sales tax base. Click here for HB 2287 Testimony.

The House Tax Committee worked HB 2287 on Tuesday, 2/14/12. HB 2287 failed to move out of committee for further consideration on the House floor. Thanks are extended to all who assisted with keeping this bill in committee.

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9) Kansas Advisory Council on Intergovernmental Relations

The House Government Efficiency Committee held a hearing on HB 2725 this week. HB 2725 would repeal the Kansas Advisory Council on Intergovernmental Relations. The League opposed this bill. Click here for HB 2725 Testimony

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10) KPERS Introduces New Bill

The Senate KPERS Select Committee and the House Pensions and Benefits Committee met several times this week to discuss KPERS.

After killing the study commission bill last week, the Senate KPERS Select Committee introduced SB 429. Under this bill, all new hires starting January 1, 2014 would participate in a part cash balance plan, part defined contribution plan. The cash balance part of the plan would contain only employer contributions. The contribution would be based on an employee's years of service. Employees would receive a 1% match of their salary for the first year of service. The match would then increase .5% for every year of employment up to 5% after eight years of service. Employees would not direct the investment of these funds; investments would mirror KPERS funds' investments. A 0% interest rate would be guaranteed. This means an employee would receive the principal balance of the fund (their employer's contributions) even if the investments lost money. The defined contribution part of the plan would contain employee contributions. Employees would be required to put 6% of their salary into this plan and would direct 100% of the investments. The Senate Committee also heard testimony about cash balance plans.

Meanwhile, the House Pensions and Benefits Committee held a hearing on HB 2545, the bill proposed by the study commission during the interim. The League testified in opposition of the bill and respectfully requested that the Committee keep the local government group out of any plan design changes since its system is not underfunded.Click here for HB 2545 Testimony. The House Pensions and Benefits Committee raised several concerns about the bill and received testimony about cash balance plans this morning.

Both committees also heard from Alan Conroy, KPERS new executive director. Conroy explained that implementation of HB 2194 and the study commission's bill would probably not be feasible until January 1, 2015 at the earliest. The League will continue to monitor the committees and keep you updated.

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11) Reapportionment Deal Changes Discussion

The redistricting process took several turns this week. SB 344, the U.S. Congressional map approved by the Senate, may be dead. The Governor struck a deal with the Speaker of the House and the Senate President to have Manhattan remain in the 2nd District. Accordingly, all of the six maps the House Committee on Redistricting looked at Wednesday kept Manhattan in the 2nd District. The maps' similarities end there, though. Some proposed maps stretch the 2nd District across the northern border of Kansas, others split Shawnee and Riley County, and another makes the 2nd District a majority-Democrat district. Those maps can be viewed here, beginning with "EISENHOWER." The Governor's deal essentially restarts the U.S. Congressional redistricting process, so whatever action the House takes next week likely will be the template for the final map.

The Senate Committee on Reapportionment continued to discuss the state Senate districts. Accusations have been made that two maps introduced on Monday attempt to gerrymander primary opponents out of certain Senator's districts. Those maps can be viewed here and here. On Wednesday, a map was introduced that attempted to remedy this criticism (click here for map), but the Chairman still forbade witnesses from reading their testimony to avoid further politicization of the process.

Once the Senate finishes its work on the Senate districts, it still has quite a bit of work left to do. It must consider HB 2606, the state House map passed by the House last week. That map can be viewed here. It must also begin redistricting the Board of Education districts, and reconsider the U.S. Congressional districts. LKM will keep cities updated as the redistricting process continues.

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12) LKM Testimony This Week

This summary reflects all of the bills that LKM has testified on this week (February 13-17). All other testimony can be found at http://www.lkm.org/legislative/testimony/.

General Local Government

Solid Waste Preemption (HB 2639)
This legislation would prohibit cities and other municipalities from providing commercial solid waste services if a private hauler can provide the services at the same or lower cost. LKM, along with the Kansas Association of Counties, and other entities oppose this legislation as an infringement on home rule and local control.

Immigration (HB 2492, HB 2577, HB 2576, HB 2578)
The immigration bill testimony involves three separate bills that would create unfunded mandates, administrative complexities and potential litigation and liability. LKM will be testifying in opposition to these bills on those bases during the week of February 13.

Repealing the Kansas Advisory Council on Intergovernmental Relations (HB 2725)
This bill would repeal the statutes concerning the Kansas Advisory Council on Intergovernmental Relations, effectively dismantling the council. The League opposes this bill.

Public Employees

KPERS Select (SB 338)
These are LKM's comments on the KPERS Study Commission bill proposing that the local government plan be separated from the state and school plan, and that no changes be made to the local plan.

Prohibiting Discrimination Based on Unemployment Status (SB 295)
This bill would prohibit employers from inquiring about a job applicant's gap in employment history. The League opposed this bill because it effectively prohibits employers from inquiring into a job applicant's employment history and could potentially make background checks unlawful.

KPERS (HB 2545)
The House KPERS testimony is identical to the Senate version. These bills reflect the decisions of the KPERS study commission. LKM testified in opposition on the basis that the local government group is not that underfunded and should be left out of any changes to the current system. This is the position taken by the LKM Governing Body.

Public Safety

Establishing a Safety Corridor (HB 2556)
HB 2556 permits the Secretary of Transportation, based upon criteria contained in the bill, to establish and designate certain segments of highways as being "safety corridors." The intent of the program is to elevate safety awareness by vehicle operators within the designated zones to reduce traffic violations and accidents. Fines for moving violation in a safety corridor would be doubled. The League supports HB 2556.

Dangerous and Abandoned Structures (HB 2646)
HB 2646 would amend current law regarding dangerous and abandoned structures by including commercial real estate in the definition of abandoned property. LKM supports this change.

Tax & Finance

Machinery & Equipment "Trade Fixtures" (SB 317/HB 2501)
This legislation would expand the definition of machinery and equipment to include “trade fixtures.” The definition of a trade fixture is unclear at this point. LKM opposes this legislation as a further erosion of the property tax base.

Transportation

Transportation Funding (HB 2747)
League is opposing one specific aspect of HB 2747, the House Tax Plan, which deletes the 4/10 of a cent funding for the T-WORKS Comprehensive Transportation Program beginning July 1, 2013. Removal of this revenue source would effectively eliminate many of the promised T-WORKS projects.

13) Upcoming Hearings

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14) Upcoming MLAs

March's MLA, Finance Planning and Policy Concepts, will be the first webinar offered through the MLA program on Friday March 16th and Saturday March 31st. This course will offer participants a better understanding of municipal finance issues in Kansas. Finance Planning and Policy Concepts has been designed to complement the themes covered in the core MLA municipal finance class. Prior participation in Municipal Finance not required. For more information and registration, please click here.

We have added a webinar course for Ethics, scheduled to take place Friday, March 23rd. Registration is available here. There will be a morning session from 10:00a.m.-11:30 a.m., and an afternoon session from 1:00 p.m.-2:30 p.m. Participation in both sessions must be completed to earn credit.

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