Primary property tax preferred over secondary one, city official says

Kingman taxpayers would have saved more than $1 million if Airway Avenue construction had been paid for with a primary rather than a secondary property tax, a city official said.

"It is the saving that comes from paying for projects as they are built," Kingman Financial Director Coral Loyd said.

"A secondary property tax collects taxes over a period of years to pay back money borrowed to finance a project.

The primary tax collects the money in advance."

Loyd estimates financing projects increases costs by 30 percent over paying for them as they are built.

It is similar to buying a house with a mortgage compared with paying cash up front.

The Airway Avenue project cost $3.8 million, which was financed with revenue bonds repaid by a voter-approved secondary property tax.

Add 30 percent to finance the project during 10 to 15 years and residents pay another $1,140,000 in interest for that road construction.

The primary property tax proposed by the Kingman City Council would collect an estimated $1.5 million per year and could have paid for the Airway Avenue project in two and a half years.

The city's debt limit is set by the state, which delays projects when secondary property taxes are used to repay debt.

The next project cannot be voted on until the debt limit is reduced.

The debt limit has delayed consideration of an Airway Avenue underpass at the Burlington Northern Santa Fe Railway.

The City Council decided a primary property tax would decrease the cost of capital projects by avoiding finance charges.

No debt would be incurred, and projects would not be delayed by debt limit considerations.

Kingman residents can vote on the tax on or before May 20.

City council members have said the primary property tax would give them greater flexibility in planning future capital projects because a known amount of money would be available.

A secondary property tax must be approved by the voters for each specific project.

It would be much easier to negotiate with Burlington Northern Santa Fe if railroad officials knew Kingman had solid financing for the underpasses, Mayor Les Byram said.

The council's list of capital projects includes underpasses and improved crossings at Airway Avenue, Louise Avenue and Topeka Street.

The railroad wants to remove as many at grade crossings as possible.

Improvements along Bank Street and purchase of right of way for improving Gordon Drive also are on the list.

"Financing capital projects as we go using a primary property tax is 'out of the box' thinking not usual for a city," Loyd said.

"Cash is always the cheapest way to finance capital projects."

Kingman paid for large projects with state and federal money and local sales tax during the prosperous 1990s and has paid for each without incurring debt with the exception of Airway Avenue.

The current downturn in the economy and the Arizona budget crisis have reduced these sources of revenue.

For example, Kingman's share of the state income tax has been reduced $350,000 annually.

"We are already $500,000 in the hole from lost state revenues in the current budget," Councilman Dave French said.

"Capital items are the first to be cut to balance the budget," Councilman Jim Baker said.

"The needs are not going away anytime in the future."

Councilman Fran McVey said Kingman residents would have a safer city if three railroad underpasses reduce police and fire response time.

"We would be shirking our leadership duty if we did not present this to the voters," Vice mayor Phil Moon said.

"After all, they have ultimate control and can elect another council at any time."

Kingman residents have not paid a primary property tax for 20 years since a previous council allowed the authority to lapse.

Voter approval is required to regain the authority.

Regular polling places will be open May 20.

Until then, registered voters can cast ballots from 8 a.m.

to 5 p.m.

Monday through Friday at city hall at 310 N.

Fourth St.

Ballots also can be obtained by mail or by calling the city clerk's office at 753-8114.