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Officials puzzled by county's tax loss

The economy's good, so officials wonder whether problems at the Kansas Department of Revenue are to blame.

By Lillian Zier Martell The Wichita Eagle March 17, 2000

Sales tax revenue is down across Sedgwick County, and local officials want to know why.

Because the local economy appears to be healthy, they are looking at several possible explanations -- from the competition of tax-free Internet sales to mild weather.

And recent problems at the Kansas Department of Revenue have led them to ask whether the state agency that collects sales tax money is distributing the revenue correctly, County Manager Bill Buchanan said.

"We don't have the full confidence we need," he said.

Consumers in Sedgwick County pay 5.9 percent in sales taxes. One point of that is a countywide sales tax. The rest is a state sales tax.

The state collects all of the money and returns the 1 percent local tax to the local government units within Sedgwick County.

Spokesman Scott Holeman said the Revenue Department is behind in distributing January revenue because of its new computer system.

But state officials do not think the Revenue Department is to blame for a decline of revenues from 1998 to 1999, he said.

Sales taxes distributed to Sedgwick County and its 20 cities dropped nearly 4 percent from 1998 to 1999, a countywide loss of $2.62 million, said Chris Chronis, the county's chief financial officer.

The county government's share of sales tax revenue declined $500,000 from 1998 to 1999, Chronis said. The trend is continuing this year, he said.

Because of the losses, the county may have to trim this year's budget, Chronis said.

Wichita city officials reported in February that the city had seen its first sales tax loss since the tax was imposed in the mid-1980s.

City budget officer Rob Raine said he shares the county's concern about the Revenue Department, particularly because state sales tax revenues are up. The city had also previously blamed competition from Internet sales, which are not taxed.

State sales tax revenue rose 2 percent from 1998 to 1999, Holeman said.

Raine and other local officials question how the state revenues could be up while the state's most populous county is getting less.

"The economy's booming. We're in a highly populated area," County Commissioner Carolyn McGinn said.

"If the state's going up and we're going down, something's wrong."

Mild weather over the past year could be one reason for the disparity, Holeman said.

If people use less heating and air conditioning, they pay less sales taxes on utilities.

The state does not collect sales taxes from utilities as some local governments do, so the state would not be affected by a decline in utility revenues.

That makes it possible for a local government to receive less while the state's revenue grows, Holeman said.

County budget director Renfeng Ma agreed that the mild weather would affect local sales tax receipts from utilities, but he's not sure to what extent.

Based on trends and other economic indicators, the county should be seeing an increase in sales tax revenue, Ma said.

"It's an issue we're struggling with," he said. "We're not seeing the increase coming in as it's supposed to."

Lillian Zier Martell can be reached at 268-6404 or lmartell@wichitaeagle.com. http://www.wichitaeagle.com/news/regional/docs/county0317_txt.htm

-- (Dee360Degree@aol.com), March 17, 2000