The Gardner Edgerton School District should receive a bump in revenue in the near future.
Due to an error, Kimberly-Clark, a Dallas-based health and hygiene company, received tax bills with a 75 percent abatement on warehouse property at New Century AirCenter.
The Johnson County Board of Commissioners approved a 50 percent abatement for 10 years for the corporation. Construction on the warehouse was completed in 2008, and since then the company that owns the land has paid tax bills that include a 75 percent abatement.
The error could have cost public taxing entities including the Gardner Edgerton School District,
Johnson County parks, libraries and community college; and the state of Kansas more than $1 million in tax revenues over the 10-year life of the abatement. Between 2008, 2009, and 2010, the error resulted in a more than $339,000 tax break for the property owners that may have continued.
Since the billing error was brought to the county’s attention, steps are being taken to remedy the situation. Revisions to the faulty tax bills have been sent, Johnson County Appraiser Paul Welcome said.
Kimberly-Clark leases the land and warehouse from USAA, which financed construction of the property using Industrial Revenue Bonds, or IRBs. The county offered a 50 percent abatement to assist in the sale of bonds for the project. The tax savings were passed on to Kimberly-Clark.
Welcome said the appraiser’s office drafted the faulty tax bill using forms provided to it from bond counsel on the project, Kutak Rock’s Janet Garms.
“If you look at the paperwork we were given, we followed it correctly,” Welcome said. “I’m
sure bond counsel is not feeling very well about it either.”
Garms said the error is being rectified.
“It was a typo on a percentage. We’re in the process of getting that corrected,” she explained.
Kutak Rock, whose attorneys also serve as bond counsel for the city of Gardner, Spring
Hill and Edgerton, has a process in place to review documents and check for mistakes, she said.
“We will continue to do that to make sure there are no errors,” she said.
Officials at Kimberly-Clark said they are working to rectify the mistake.
“It appears a typographical error was made on the agreement between USAA and the county when ownership of the property changed in 2008,” Kimberly-Clark spokesperson, Stephanie Forest wrote in an email to The Gardner News.
“USAA passed the credit through to Kimberly-Clark. Both USAA and Kimberly-Clark are working with the county to resolve the issue.”
USAA’s 2008 bill included another mistake. That year, the land, which is billed separately than the building, was classified as non-profit, vacant land rather than commercial land. Welcome said the misclassificiation was a result of old software, which has since been updated. The mistake gave the corporation a $6,100 tax break that, due to state law, can not be rectified.
“I cannot legally go back and collect that,” Welcome said. “That was a true mistake on our part.
But there are court cases that say I can not go back and change that.”
In the meantime, the Gardner Edgerton School District, the primary tax collector on the property, stands to receive a large bump in revenues when the corporation and county correct the abatement error. According to estimates, the school district will receive a revenue boost of more than $150,000.
Eric Hansen, Gardner Edgerton School District Business Director, said the error had not been brought to his attention.
“I’m kind of curious if we’re going to see a formal letter on that or if we would just see a slightly higher delinquent tax,” he said.
The district builds its budget using projections from the county appraiser’s office and the county clerk’s office. The school budget includes a delinquent tax line and a projected amount of late taxes that will be collected in the upcoming year. For example, in the 2009-2010 budget, the district budgeted $95,000 in delinquent tax revenue and received about that amount.
“That might be one of the ways (the tax error) shows up,” Hansen said.
School officials don’t typically parse through property tax bills to ensure that they’re accurate. With a district-wide assessment valued at between $230 and $240 million each year, Hansen said that would be difficult to do.
“We just have to rely on the different parties to do their jobs and get it to us,” he said.
It does make him wonder, however.
“If it happens with Kimberly-Clark, has this happened with other entities given abatements in our district?” Hansen said. “Obviously it’s going to be looked upon. It may trigger some sort of a look back.”
At the county appraiser’s office, Welcome said they are putting processes in place to ensure it doesn’t happen again.
“We are having a new cross check put in place for that,” he said.
Billing error gives Kimberly-Clark $339k tax break