Harvey County is looking for a new way to pay the City of Newton tax revenues to support Sand Creek Station — the result of a new tax lid and an agreement reached in 2005.

In 2017 the county cut a check to the City of Newton for $89,421.61 — helping service more than $7.5 million in bonds used to build Sand Creek Station Golf Course.

Those bond were issued in 2005. They will mature in 2025.

However, that bond maturation may not lead to stoppage of that payment — a tax diversion — according to county commissioner Chip Westfall.

“It has a rollover system that stays in place until all the lots are sold,” Westfall said.

When the housing developments around the golf course were created, it was believed those lots would all be sold in 10 years. That did not happen, Westfall said.

According to an interlocal agreement created in 2005, the county is “contributing” to the city the amount of the increase in the increased tax revenues to the county mill levy from the development of the housing subdivision property surrounding the golf course.

“The agreement was, years ago, they agreed that in the housing area the county would only keep the (taxes on) the evaluated lot price,” Westfall said.

When a lot is sold, and improved, the additional tax revenue from increased evaluation is forwarded to the city. Those funds are then deposited into a fund for the Public Building Commission debt service for Sand Creek Station.

The debt is in the form of two bond issues, according to city manager Bob Myers.

“There ended up being two bond issues to finance the overall golf course project, one referenced as the Series 2005 Bonds for the acquisition of the land and the construction of the golf course improvements in the amount of $7,035,000 and one referenced as the Series 2005B Bonds for the acquisition of all of the various machinery, equipment and tangible personal property necessary for the operation of the golf course in the amount of $975,000,” Myers told the Kansan  “Those bond issues were refinanced in 2012 in order to take advantage of lower interest rates then available.  The bonds will be fully paid in 2025, which is the same payoff date under the original bonds.”

The city is also contributing to the payment of those bonds, using a similar structure for the housing developments. City staff did not have the exact number of how much that was for 2017 when asked by The Kansan.

“The bond payments are not in precisely equal amounts each year,” Myer said.

Myers told the Kansan he would research the amount, both current and historical, of diverted taxes by the city.

For the county, the payment to the city could create problems under a tax lid provision passed by the Kansas Legislature that limits mill levy growth for local governments.

That problem, according to county administration, is a primarily an accounting problem.

“Changing where the funding comes from could potentially ease the restriction the agreement placed on Harvey County's budget process now that the tax lid is in place,” said Kyle McCaskey Public Information Officer/Special Projects Coordinator for Harvey County.

“That $90,000 counts against us,” Westfall said. :...If the numbers line up in a no-growth year, that could be bad. … At some point, it could max us out.”

Meaning that if the amount for Sand Creek goes up, while there is little to no evaluation growth throughout the county, it could create budgeting problems for the county under the tax lid limitation.

Westfall said the county should be “good until 2021,” but would like to see changes before then. He said the county needs to move the payment out of general funds and become more of a “pass-through” that would not affect the county budget.

"We need to change that to help us out,” Westfall said. “... We want to come to a different agreement.”