MINUTES

 

Legislative Post Audit Committee

March 16, 2005

 

            The meeting was called to order by Representative Edmonds at 12:15 p.m. in Room 241-N of the Statehouse.  Committee members present:              

           

Representative John Edmonds, Chair Representative Tom Burroughs Representative Bill McCreary

Representative Peggy Mast

Senator Les Donovan, Vice-Chair

Senator Nick Jordan

Senator Derek Schmidt

 

 

Approval of Minutes

 

            Senator Donovan moved to approve the minutes of the February 21st and February 25th meetings.  Representative Mast seconded the motion; motion carried.

 

 

Completed Performance Audits

 

            Kansas Department of Transportation: Reviewing the Costs Associated with Recent Bond Issues.  This audit was presented by Laurel Murdie, Principal Auditor.  In November 2004, KDOT issued two types of variable-rate bonds totaling $347 million to fund highway construction.  These bonds are re-marketed weekly to take advantage of lower short-term interest rates.  The agents who re-market the bonds receive fees that generally are about one quarter of 1% of the amount of bonds outstanding, or about $771,000 a year.  For $147 million of the bonds, KDOT entered into an agreement with an investment banking firm that will “synthetically” fix the rate of interest on those bonds at about 3.6%. That will save KDOT an estimated $1 million a year after all fees associated with the bonds have been paid.  For the other $200 million, KDOT didn’t do a cost-benefit analysis.  KDOT officials indicated that over the last 20 years variable-rate bonds have always produced interest savings of at least one percentage point, which would more than offset the fees they would pay on these bonds.  If interest rates should rise over the next few years, those interest cost savings are less certain.  Finally, we noted that the fees KDOT paid to issue and maintain these bonds are in line with fees paid by other bond issuers.  Ms. Murdie answered members’ questions.

 

            Deb Miller, Kansas Department of Transportation Secretary, and Reed Davis, Manager of Economics Analysis, were available to answer members’ questions.

 

            Senator Donovan moved to accept the audit.  Senator Schmidt second the motion; motion passed.  The report will be distributed to the House and Senate Transportation Committees, and the House Appropriations and Senate Ways and Means Committees.

 

            Property Valuation in Kansas: Reviewing the Valuation of Agricultural and Commercial Properties.  This audit was presented by Katrin Osterhaus, Senior Auditor.  State law requires all real property subject to taxation to be appraised uniformly and equally as to class, and at its fair market value, except agricultural land, which is valued at “use” value.  All the differences in value in our within-county comparisons of 18 pairs of commercial buildings and eight pairs of agricultural structures seemed justified.  Differences in property values across counties reflect appraisers’ decisions about market conditions; some seemed justified, but others were questionable. 

 

            Land classified as agricultural receives a significant tax break, and getting land reclassified to agricultural is relatively easy because of Kansas’ broad definition of agriculture.  Tax receipts in Johnson and Butler Counties were reduced by at least $204,000 for 2004 after 64 plots of vacant land were reclassified as agricultural. Kansas may want to consider implementing a tax roll-back policy to recoup property taxes when agricultural land is reclassified.  Concerns about agricultural land being purchased for recreation, yet continuing to be classified as agricultural, is an issue in southeast Kansas.  But because the uses aren’t mutually exclusive (that is, land purchased for hunting can be used during most of the year for growing hay or grazing cattle) it’s unlikely this situation will change unless the Legislature chooses to significantly narrow the State’s definition of agriculture.  Ms. Osterhaus answered members’ questions.

 

            From the Department of Revenue, Tony Folsom, Deputy Director of Property Valuation; Nick Kramer, Director of Internal Audit; and Carol Neihardt, Division of Property Valuation Field Staff Supervisor, were available to answer members’ questions.  Also present and available for questions was George Clark, Washington County Appraiser.

 

            Representative Mast moved to accept the audit.  Senator Schmidt seconded the motion; motion passed.

 

            The report will be distributed to House and Senate Agriculture Committees and the House Taxation and Senate Assessment and Taxation Committees.

 

 

Completed Compliance and Control Audit

 

            Corporation Commission.  This audit was presented by Randy Tongier, Audit Manager.  The compliance and control audit of the Corporation Commission looked at the Commission’s oversight of energy grants to local organizations.  The Commission had adequate procedures to ensure appropriate local spending of grant moneys, and had made significant improvements since the previous audit.  Tests of a sample of local spending found that grant moneys were used for appropriate and allowable purposes.  Mr. Tongier answered members’ questions.

 

            Jackie Montfoort-Paige, KCC Chief Fiscal Officer, was available for questions.

 

            The report will be distributed to the House Appropriations and Senate Ways and Means Committees.

 

           

Date of the Next Meeting

 

            The Committee’s next meeting will be on Wednesday, March 23, 2005, from noon-1:15 p.m. in Room 241-N. 

 

Meeting was adjourned at 12:37 p.m.

 

(All handouts and other documents referred to in these minutes are on file with Legislative Post Audit.)