KEPC UPDATE: Small business priorities, Moody’s, negative bonds, GOP conflict, transpo meetings

In this issue …

  • What’s important to small business? Property taxes beat income taxes
  • Moody’s: highway bond outlook to negative
  • Law Enforcement Training Center bonds also negative
  • GOP conflict possible on sales tax/highways
  • Transportation meetings

What’s important to small business?  Property taxes beat income taxes

A survey by the 350,000 member National Federation of Independent Business (NFIB) ranks property taxes as a bigger problem for the small business organization’s members than state taxes on business income.

Property taxes were ranked 9th in the survey, while state income taxes on business were ranked 10th.

According to the NFIB, the top problem remains the cost of health insurance, followed by uncertainty over economic conditions, and energy costs.

Here’s the top ten from the report, “Problems and Priorities.” It includes what percent responded that the problem was “critical.”


Measure of Small Business Problem Importance (NFIB survey)

RANK      Problem                                                                            Percent “Critical”

1                 Cost of health insurance                                               52.3
2                 Uncertainty over economic conditions                        38.3
3                 Cost of Energy                                                                  34.8
4                 Uncertainty over government actions                          35.1
5                 Unreasonable government regulations                        34.1
6                 Federal taxes on business income                              29.5
7                 Tax complexity                                                                    28.8
8                 Frequent changes in federal tax laws and rules        24.0
9                 Property taxes                                                                  24.4
10              State taxes on business income                                    23.8

Property taxes were ranked 4th back in 2008, the last time NFIB conducted the survey.  Explaining why the problem has changed in ranking, NFIB said:

“The recession took a heavy toll on real estate values thus tempering the impact of property taxes on small-business owners.  As real estate prices increase, this will likely become a greater problem.  Small business owners are heavily invested in real estate, with 92 percent owning property, most owning their primary residence but many also owning commercial and investment properties.”


Moody’s: highway bond outlook to negative

Moody’s, the bond credit rating organization, has weighed in again on Kansas finances, saying the state’s frequent raids on highway funds hurts the viability of highway bonds.

Moody’s had this to say August 16 about the sale of $151 million in Kansas revenue refunding index bonds:  “The outlook for KDOT’s bonds remains negative” and, “Revenues are insufficiently insulated from state general operating needs.”

In summarizing the outlook for the bonds, Moody’s said, “The outlook for Kansas Department of Transportation highway revenue bonds is negative, based on the fiscal pressures of the state, which has frequently relied on KDOT resources to help close budget deficits.”


Law Enforcement Training Center bonds also negative

On a related note, Moody’s raised questions about what’s happening to court docket fees in Kansas that are supposed to fund bonds for improvements at the Kansas Law Enforcement Training Center, which is run by the Board of Regents.  The center trains law enforcement officers and is located near Yoder, in Reno County.

A July 18th Moody’s statement said:

“The outlook for the Kansas Development Finance Authority’s revenue bonds for the Kansas Law Enforcement Training Center project is negative, reflecting a series of declines in revenues and uncertainty about the revenue trajectory in coming years that could significantly erode debt service coverage.”

Moody’s added: 

“Revision of the outlook to negative follows a third consecutive year of declines in the court docket fees pledged to the bonds.  This weakening trend indicates that the revenues securing the bonds may not be insulated from economic conditions or may be vulnerable to other unknown factors. The rate of revenue diminution eased in the year ended June 30, 2012, but the likelihood of future recovery is difficult to assess, given limited disclosure on what caused the three-year decline.”

There are about $15 million of Law Enforcement Training Center bonds outstanding.


GOP conflict possible on sales tax/highways

By now, you probably know that Governor Brownback confirmed to the Associated Press last week that he’s considering the possibility of asking (once again) for the one-cent sales tax increase enacted in 2010 to continue.  Under current law, the sales tax drops by 0.6 of a cent to 5.7 percent in July.  The remaining four-tenths of a cent that was enacted is slated to be used for T-Works, the new ten year comprehensive transportation program.

Hallway talk at the Statehouse last week included speculation that the sales tax could remain temporary, but extended for something like five years.  That could be a tough vote, especially since that concept has failed before in the House of Representatives and many of those lawmakers are expected to return.

On March 17, 2011, the House considered Senate Bill 1, which included a provision to make the one-cent sales tax increase permanent.  It failed that day 56 to 61.  Later in the week the bill, which phased out income taxes, passed the House with the permanent sales tax provision removed.  It did not pass the Senate that year.

Meanwhile, very conservative Republicans have been talking about eliminating the entire one-cent sales tax increase, including the four-tenths of a cent that’s supposed to continue for transportation.  Governor Brownback has pledged to protect transportation many times.  Such a move could pit him against those Republicans who want all of the 2010 increase to go away.


Transportation meetings

A series of eight transportation meetings across Kansas were held in September and October by KDOT to discuss future projects, should additional funding become available.  Communities were asked to prioritize a few projects in each area that could be selected for preliminary engineering work.

Kansas Secretary of Transportation Mike King says the meetings were very productive with hundreds of people in attendance.  He says KDOT hopes to have the results compiled for the 2013 legislature.

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