Too much rain. You’ve probably thought that a time or two over the last few months. Farmers in the area have had a hard time getting their crops in. I’ve heard more than a few people claim they’ve had to mow their yards twice a week to keep up with the growth. My kids have watched mournfully out the window as the rain keeps them in the house rather than running around outside. If you’ve driven around town the past few months, you’ve also likely noticed a lot of potholes.
Now, this isn’t a criticism of the city workers or our local government. In the past two months we’ve had something like 150% to 200% of normal rainfall. Streets will develop potholes with that much rain and they can’t be fixed if it’s raining every other day. We’re stuck avoiding them until the rain lets up. When the rain lets up, they can be fixed, but we have to pay for it.
We all want nice smooth streets, well-maintained parks, and other local amenities, but we sometimes forget what it takes to fund them: local commerce. I’ve written previously in this column about the importance of local commerce, but the recent rain and potholes gives me an excuse to discuss the details of local tax revenue.
What are the sources of local tax revenue in Kansas? I found this information on the Urban-Brookings Tax Policy Center website. I wasn’t able to find data specific to Ottawa, but I found the average revenue for municipalities in Kansas from 2006 to 2016.
Local governments are funded by their own revenue as well as transfers from the federal and state governments. In Kansas, local governments get about two thirds of their revenue from their own local taxes and fees. This has shifted over time, but hasn’t risen above 71% in the 10-year period I examined. Just under a third of local revenue comes from transfers from the state government. This percentage is higher now than it has been in the 2006-2016 time period. Less than 2% of the revenue comes from federal transfers.
Other municipalities around the country have, on average, a slightly different breakdown. Revenue from local taxes and fees average just over two thirds, which is similar to Kansas. However, the average municipality nationwide gets around 4% of its revenue from federal transfer (compared with less than 2% in Kansas) and about 28% from their respective states (compared with roughly 32% in Kansas).
So, we Kansans don’t depend as much on the federal government for overall local government revenue as others, but more of our money comes from the state, at least in 2015 and 2016, the most recent information I could find. Thus, patronizing local businesses is important for us.
Specifically, we need to patronize, local businesses that don’t receive large property tax incentives. About 25% of local government revenue in Kansas comes from property taxes. About 8% comes from sales taxes. Those two tax revenue sources combined make up about half of the local sources of revenue for local governments in Kansas. That means that one of the most important ways your spending habits impact the quality of your roads and parks is the property taxes paid by businesses right here in Ottawa. Amazon isn’t going to maintain our roads. Neither are the businesses in Lawrence and Kansas City. Next time you’re ordering something online or driving 30 minutes for a shopping trip, remember the potholes that could have been filled if you’d shopped here in Ottawa.
— Levi A. Russell, PhD is the Professor of Economic Educationand Research at Ottawa University’s Gwartney Institute.