Legislature business aid bills draw county attention
The Kansas Legislature recently passed a pair of bills for business relief for COVID-19 concerns — both of which will involve counties providing funds to businesses who were, in the words of the Legislature, harmed by health orders.
How those bills will ultimately affect county governments is unclear — and if the bills will be come law is also unclear.
"We have lots of questions about this bill. First we need to wait and see if the governor vetoes this bill or not," said Anthony Swartzendruber, county administrator for Harvey County.
Both bills require counties to set aside funds for reimbursements, whether that be from general fund or from federal COVID-19 funds allocated to each county. It is unclear if the legslative action is in compliance with guidance from the U.S. treasury concerning those federal funds.
We believe the bill may be in conflict with treasury guidance that states how relief funds can be spent," Swartzendruber said.
One of the bills requires a rebate of property taxes, while the other requires counties to set aside 35 percent of federal aid funds to be controlled by the state.
"There is a lot to be worked out and a lot of questions to be asked. I am sure we will have this at the [Kansas Association of Counties] in October to talk about this as the clarity of what is trying to be done is brought forth to us," said Chip Westfall, Harvey County Commissioner and president of the KAC.
Making up for lost income
Senate Bill 273, named the COVID-19 Small Business Relief Act, is closely tied to a lawsuit put on pause between the state and a Wichita gym.
The gym had sued the state, saying a provision in emergency management laws allows it to seek financial damages related to the statewide shutdown of nonessential businesses. But how that provision should play out remained unclear.
The act clarifies that provision doesn't apply to intangible losses during the pandemic, such as lost profits. Tangible losses can still be sued over, but businesses can give up that option if they pursue a easier, less costly process outlined by the act.
"A large majority of businesses will use the procedure, and maybe some won’t,” said Sen. Kellie Warren, R-Leawood, but "there will be zero litigation over intangible losses."
Read more: Does Kansas owe businesses for mandating they close? A lawsuit says yes.
Not only would Kansas face fewer lawsuits, but businesses can also get the cash compensation easier and without lawyers. The money would come from all federal COVID-19 relief funds flowing into cities, counties and the state.
Federal rules may mandate certain amounts of that relief money be spent on certain things. But afterward, Kansas and would have to set up to 25% of everything else to pay out claims under this process. Any local government that implemented shutdowns or virus restrictions would have to set aside 35%.
Once all the funds run out, all future claims for compensation become null and void. That percentage was a matter of debate, and some conservatives even wanted it raised to 100%.
"Are we going to force entities to pick and choose who the winners and losers are on whether they get relief or not?" said Sen. Dennis Pyle, R-Hiawatha. "We need to make it big enough that it covers everybody."
Businesses are eligible for this process if they have 50 or fewer full-time employees, were in operation at the start of the pandemic and are for-profit. Virtually any COVID-19 restriction affecting business operations are applicable to apply against, though mask mandates in place before May 31 are exempted as part of a compromise with cities.
Compensation claims must be filed within the last three months of 2021. Businesses would have to provide tax returns, how they were hurt by the order, what other aid they got, how much of the money is to be used for salary compensation and other details in their applications.
Businesses must give the portion they promised they'd dedicate to employees in the application; otherwise, that money could have to be paid back.
A three-member board appointed by legislative leaders and the governor would preside over the claims, using a variety of factors to determine a proper amount to be awarded. Such meetings wouldn't be open to the public to protect private business interests, which prompted some raised eyebrows.
The board "is making these decisions at the local level, with no opportunity for appeal by the city or the county, with no ability to look at what those claims were," said Amanda Stanley, with the League of Kansas Municipalities. "That's no ability to appeal by the business either. So if the panel tells the business, 'No,' they don't get to appeal that either.
"They don't get to ask why. And all of these claims are confidential."
"The confidentiality of it is unusual," said Chip Westfall, Harvey County Commissioner and president of the Kansas Association of Counties. "We don't know why this person, legitimate request I am sure, But I think the public has the right to know where public tax dollars — whether federal of state — go to."
Some lawmakers also feared politics would get in the way of things, given the board is appointed by political leaders. But Warren pushed back, saying confidentiality and the lack of an appeal process was agreed to get relief money out as fast as possible.
To help address transparency concerns, House lawmakers in negotiations added more oversight over the process from more parties in legislative and executive branches. They also added a reconsideration process to allow for appeal, and results of which businesses got awarded how much would eventually become public information.
If the COVID-19 order was the same for the state and local entity, the source for money owed would be split between the two governmental funds. Otherwise, the government with the more restrictive order will have to pay the entire amount.
Such available COVID-19 relief funds must be used only for this purpose until April 2023, when it can then be freed up for other uses.
Reimbursing property taxes
If a business wasn't able to use its property to conduct business because of virus restrictions, then the property taxes it had to pay shouldn't have been paid. That's the thought process behind parts of the COVID-19 Retail Storefront Property Tax Relief Act.
Spearheaded by Steffen and Sen. Tom Holland, D-Baldwin City, House Bill 2313 would reimburse businesses at least a portion of property taxes starting in 2022 for business restrictions from any future declared emergencies, COVID-19 or not.
Lawmakers had originally intended to also reimburse property taxes all the way back to 2020, but that was scrapped due to a last-minute time crunch. Some also said SB 273 essentially did the same job.
The reimbursement amount is calculated according to a formula, rather than from a board making closed-door decisions. It takes into account whether it was a business shut down or simply a restriction as well as the number of days the order was in effect.
Eligibility requirements for this program are many, as lawmakers wanted to make sure it was narrowly tailored to target small, mom-and-pop businesses. Businesses must be for-profit and have a majority of its retail sales be on site.
The act doesn't target federal relief funds like the other bill; instead, it has counties reimburse from its general fund a portion of property taxes for future shutdowns or business restrictions. If the state or city was the one who implemented the order, it would have to reimburse counties for that cost.
But using general funds might mean that local governments may have to raise taxes in other areas to make up for that lost money.
"That can result in a tax shift where residential and agricultural properties and non-qualifying business properties would actually be refunding or rebating that money to the qualifying businesses," said Jay Hall, with the Kansas Association of Counties.
Read more: Kansas businesses affected by COVID-19 restrictions might get property tax reimbursements
And unlike SB 286, there originally was no specific definition of what a restriction is, which could have wide-ranging implications and chill future responses to emergencies.
For example, if a bridge is damaged by a flood and a road has to be closed to fix it, that road's closure could prevent people from going to a business. Under this bill, counties might be incentivized to not repair it and keep the bridge closed, said Hall.
It "will make people hesitate," said Trey Cocking, representing Kansas cities, "and I think you are going to have outcomes to property and life that are not good."
Kansas lawmakers agreed that "restrictions" had to be defined more, and they defined it as business occupancy and operation limitations but excluded mask mandates.
— Chad Frey, Newton Kansan, contributed to this report