Holton's 2024 city budget will exceed revenue neutral rate

Although the City of Holton’s budget for fiscal year 2024 will include a reduction in the overall ad valorem tax levy, that budget will still exceed the assigned “revenue neutral rate” designed to keep the amount of taxes collected the same as the previous year, the Holton City Commission learned at their regular meeting on Monday.

But as commissioners noted, going above the assigned “revenue neutral rate” of 53.072 mills for 2024 — a proposed reduction of more than six mills from the 2023 budget of 59.112 mills — is a necessity in order to keep the city running smoothly, especially in terms of keeping city employees’ salaries competitive with those in other fields. The city’s increase in valuation makes the six-mill decrease possible, it was reported.

Commissioners approved notice of intent to exceed the assigned revenue neutral rate in the 2024 budget by about 2.4 mills, provided the city’s general fund receives a transfer of about $100,000 from another fund, as well as a notice of intent to hold public hearings on the revenue neutral rate and the budget prior to their Monday, Aug. 21 meeting.

And while the city’s 2024 budget has not yet been presented to commissioners for review — Interim City Manager Teresa Riley said the budget is currently being hashed out by Olathe accountant Mike Peroo — commissioners acknowledged that while the overall ad valorem tax levy for 2024 may be less than the previous year’s rate, taxpayers will likely be paying a little more in taxes than last year to keep the city in good shape.

The Kansas Legislature passed “revenue neutral rate” laws in 2021 after removing the state’s property tax lid, mandating that cities, counties and other governing bodies set ad valorem tax levies for upcoming budget years that would generate the same amount of property tax revenue in dollars as the previous tax year’s levy using the current tax year’s total assessed valuation.

Governing bodies can exceed revenue-neutral rates, however, but they need to provide notice of intent to do so to their county clerks by July 20, and when public hearings are held for the next year’s budget, those entities are also required to hold public hearings on their intent to exceed the assigned revenue neutral rate.

Riley said the Jackson County Clerk’s office assigned the city a revenue neutral rate of 53.072 mills for the 2024 budget, but expressed doubt whether the assigned rate would be a possibility for the city “with the way things have increased in pricing for us.” If the city held its tax levy steady at 59.112 mills, she said, “we think we can take care of everything” requested by the city’s department heads in May for the budget.

But if the city could transfer about $100,000 into the general fund from another fund — presumably from the city’s light fund or an equipment reserve fund — that would only add about 2.4 mills to the assigned revenue neutral rate and keep the mill levy below last year’s number, Riley said.

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