The City Commission of Arkansas City voted June 5 to approve a sales tax question for a special election to be voted on by Ark City residents.
The vote on the tax question will take place in August and September, via mail-in ballot. The ballots must be returned by noon Sept. 6.
The sales tax question would institute a one-cent general health care sales tax that would be on the tax rolls indefinitely, effective Jan. 1, 2019.
The new tax, if approved, would allow for the entire life of the bonds to be covered, which also could raise the Arkansas City Public Building Commission’s bond rating regarding the $30 million in bonds used to construct South Central Kansas Medical Center.
It also should eliminate any potential need to ever raise city property taxes to guarantee payment of the bond debt.
Also, if this sales tax question were to pass, both the current one-cent and half-cent sales taxes would sunset in January, reducing the sales tax rate from 9 percent to 8.5 percent three months early. (The half-cent tax currently is scheduled to sunset March 31, 2019.)
Refinancing is the goal
“What this would provide for is significantly better opportunities to refinance the bonds for the long term,” said City Manager Nick Hernandez.
“It really opens up our options for the long-term stability of the hospital finances. One of the potential refinancing options showed a potential for $200,000 (in) savings per year. Without this, it will be substantially more difficult to find buyers for the bonds.”
“I thought it was more than $200,000,” said Commissioner Jay Warren.
“Potentially, it is significantly more,” Hernandez said, but he cautioned that there are many variables that would contribute to the final number.
With the way things stand right now, as discussed in previous study sessions, there is little chance any refinancing can be done on the bonds.
That is because the biggest obstacle to obtaining a better bond rating is the 12 years of bond debt from 2026 to 2038 that are not currently covered by any sales tax. This lack of long-term guarantee makes potential buyers and financiers skeptical about refinancing the bonds.
The continued financial struggles of South Central Kansas Medical Center constituted much of the discussion June 5.
“If the hospital can’t make it on (1 1/2 percent), how in the world are they going to make it on (1 percent)?” asked Mayor Dan Jurkovich.
This question was mirrored later in the meeting by former city commissioner Brandon Every, who was speaking as a citizen.
“I think part of that is that we have to control the costs that we have now,” said Commissioner Kanyon Gingher.
Gingher has said on multiple occasions that she thinks the key to righting the hospital’s financial difficulties is to live within the revenues SCKMC knows it will receive after treatments have been billed. Those payments are often significantly less than the amounts that are billed.
“We want to bring in people that will help us manage those things, give us guidance, where they got out of control on the spending,” she said.
“We want to reduce costs and operate as a hospital. I think that’s where we’re at,” she said, motioning to the other commissioners, who recently stepped in to function as the SCKMC Board of Trustees for the time being. The board’s next meeting is at 5:30 p.m. June 12 at City Hall.
Tax now or tax later?
Hernandez said this sales tax question represents the best chance to refinance the bonds, and if it fails, he predicted future tax increases.
“I can almost guarantee … if we can’t refinance the bonds in the next couple of years, and you can’t (generate the numbers) at the hospital, you’re going to need another tax. It’s either going to be sales tax or it’s going to be property tax,” he said.
“This (proposed tax) gives us the best opportunity to get ahead of this thing a little bit.”
Individuals with questions or concerns about the proposed general sales tax are encouraged to attend a town hall meeting on the topic.
The first such meeting has been scheduled for 7 p.m. June 28 at the Senior Citizens Center, located at 320 South A St.
Additional meetings are planned in other locations on Thursday nights in July and August.
Sales tax question
The sales tax question in its entirety will be phrased as follows:
“Shall the City of Arkansas City, Kansas, be authorized to impose a one percent (1.00%) City wide retailers’ sales tax (the “2018 Health Care Sales Tax”), the proceeds of which shall be used only to finance payment of: (a) costs of the existing financial obligations incurred in the original construction of the South Central Kansas Medical Center (the “Medical Center”); (b) costs associated with refinancing the existing financial obligations incurred in the original construction of the Medical Center to obtain more favorable terms thereof; (c) purchasing and repairing equipment of the Medical Center; (d) compensating the Medical Center for operational expenses and supplies incurred in delivering uncompensated medical care; and (e) other health care related services provided in or for the City; the collection of the 2018 Health Care Sales Tax to commence on January 1, 2019, or as soon thereafter as permitted by law; all pursuant to K.S.A.12-187 et seq. and K.S.A. 25-431 et seq., as amended; and upon the effective date of collection of the 2018 Health Care Sales Tax, the collection of: (i) the one-half percent (0.50%) special sales tax imposed in 2009 for the financing of the construction, equipping and operation of a new hospital facility; and (ii) the one percent (1%) special sales tax imposed in 2016 for financing the costs of operation of a hospital facility in the City; shall be terminated pursuant to K.S.A. 12-187 et seq., as amended?”
In other business, the commission:
- removed one item of business from the agenda concerning a possible eminent domain action. The issue was resolved financially with the property owners prior to the meeting.
- witnessed the awarding of a 2017 Traffic Safety Platinum Award from AAA to the Arkansas City Police Department.
- recognized Police Officer Kelsey Horinek as the 2017-18 Law Enforcement Award recipient from the Optimist Club of Arkansas City.
- recognized the 2018 DARE essay winner, Frances Willard Elementary School fifth-grader Josey Arndt.
- unanimously affirmed the City Commission’s adoption May 19 of Charter Ordinance No. 34.
- unanimously approved an ordinance to approve the plat of Carver Park and accepting land dedicated for public purposes therein.
- unanimously approved a resolution authorizing the city to enter into Change Order Agreement No. 1 with Marsau Enterprises, Inc., of Enid, Oklahoma, for the Water Treatment Facility waste line to the Wastewater Treatment Facility, for an amount not to exceed $9,097.50.
- unanimously voted to follow a recommendation of the Beautification and Tree Advisory Board to transfer Brock Park, located at 501 S. Sixth St., to the city’s Land Bank program and relocate the horseshoe pits there to Pershing Park, located at 1100 N. Second St.
- unanimously voted to ratify Jurkovich’s appointment of Shawna Allison to the Arkansas City Public Library Board of Trustees.
- heard updates from Hernandez on two upcoming free movies at Wilson Park, the Relay for Life event this weekend at the Agri-Business Building and a special concert of the 312th Army Reserve Band, which will start at 7 p.m. June 14 under the rotunda at Wilson Park.