Clarifying the Revenue Neutral Rate and Property Taxes

I was encouraged to see so many individuals stepping up to run for City Commission in Abilene. That level of civic engagement is not always the case in many communities, and it reflects a healthy interest in the future of the city. The recent candidate Q&A in the Abilene Reflector-Chronicle provided thoughtful insight into the values and priorities of both the candidates and the community.

Considering the discussion around property taxes in that piece, I want to offer some clarification on a topic that understandably creates confusion for many—property taxes and the Revenue Neutral Rate (RNR) statute.

Property taxes are often misunderstood, and the introduction of the RNR law has only added to the complexity. It’s important for residents to have a clear, fact-based understanding of what this law does—and doesn’t do—so we can make informed decisions and have meaningful discussions about the future of the community.

The Revenue Neutral Rate is a state-mandated cap that says a city or county cannot collect more total property tax revenue than it did the year before without holding a public hearing and voting to exceed that limit. This has nothing to do with the inflation rate or cost increases cities face.

To put it simply: if a city collected $3 million in property taxes last year, and this year it collects $1 more, even if due to rising property values, it is considered to have exceeded revenue neutrality. That triggers a requirement to send out postcards and hold a public vote—because raising revenue (even without raising tax rates) is treated as exceeding neutrality. Importantly, a change in revenue does not necessarily mean a tax increase. Your actual tax bill depends on your property’s assessed valuation and the combined levies of all taxing entities where you live, including the city, county, school district, and yes, the state of Kansas.

Additionally, as a city grows—whether through new homes, businesses, or population—it often requires more from its local government. Growth brings benefits, but it also means more streets to maintain, more emergency calls to respond to, more parks to mow, more utilities to manage, and higher demand for planning, permitting, and code enforcement. These aren’t luxuries—they’re essential services that support a thriving, safe, and well-functioning community. While growth can eventually expand the tax base, the cost of serving new areas often comes first, requiring cities to plan and invest ahead of that revenue curve.

RNR is not tied to the Consumer Price Index (CPI) or any measure of inflation. So even if inflation is 3% or 5%, local governments cannot increase property tax revenue by that same percentage without going through the RNR process. If a city or county spends $1 more than the previous year, they exceed revenue neutrality. 

This situation is similar to how a business operates. When costs increase, businesses do their best to hold off raising prices. But eventually, they must either raise prices or reduce the size of the product. Cities and counties are no different. They may delay increasing revenue, but eventually must either raise taxes or fees, or shrink the product—which in the public sector means cutting services, reducing investment in infrastructure, and limiting support for community priorities.

This could mean slowing or stopping progress on projects like the Buckeye CCLIP, the industrial park, housing developments, public safety investments, tourism efforts, and parks and recreation programs—all of which contribute to our quality of life.

Some suggest that the Consumer Price Index (CPI) should guide city budgeting, but that’s a flawed and misleading comparison. The CPI tracks consumer expenses, such as food, rent, clothing, medical care, and transportation—categories that reflect household spending, not the operating reality of a city.

City budgets are fundamentally different. For illustration purposes consider a municipal budget that is composed of 70% personnel costs (wages, benefits, and retirement), 20% capital and infrastructure projects, and 10% operations, such as fuel, utilities, insurance, and supplies.  For accurate financial planning, cities should use indexes that reflect public sector costs, such as 1) The Employment Cost Index (ECI) for wage and benefit inflation, 2) The Construction Cost Index (CCI) for capital and infrastructure inflation, and 3) the Producer Price Index (PPI) for operational goods and services, and 4) the Municipal Cost Index (MCI), which tracks a blend of local government expenses.

Using these more accurate tools, the estimated weighted municipal inflation—based on the 70/20/10 budget distribution—is consistently higher than CPI. In 2024, the weighted municipal inflation rate is approximately 4.19%, while the national CPI average is closer to 3.2%, yet the city was revenue neutral or 0%. For 2025, municipal inflation is projected at 4.24%, compared to a projected CPI of about 2.9%, again the city was 0%.   Looking ahead to 2026, municipal inflation is estimated at 4.18%, while CPI may be around 2.8%.

This pattern shows a consistent 1 to 1.5 percentage point gap between true government inflation and CPI. Cities that use CPI as a budgeting benchmark are likely underestimating cost pressures—and if they remain revenue neutral in such conditions, they’re essentially budgeting for less capacity to serve the public each year.

It’s also worth remembering city employees and commissioners are taxpayers, just like everyone else. They face the same inflationary pressures at the grocery store, gas pump, and in their homes. City staff are the backbone of daily operations, and they genuinely care about Abilene. They are fully aware of the impact property taxes have—on both today’s residents and future generations.

Our public employees are not nameless bureaucrats. They are our neighbors, coaches, volunteers, and friends. They understand that every budget decision has real-world consequences and are committed to balancing fiscal responsibility with maintaining the services and infrastructure that make Abilene a great place to live.

Some believe Senate Bill 13 and the RNR law are solutions to high property taxes. In truth, they are procedural requirements, not tax relief. The state of Kansas exempted itself from the RNR rule, even as it continues to collect 20 mills for education. As property values rise, the state benefits—but without the same accountability placed on local governments.

Real property tax reform requires state-level changes, including restoring the Local Ad Valorem Tax Reduction Fund, which was originally designed to offset local reliance on property taxes using state sales tax revenue and stopping the trend of shifting responsibilities to local governments without funding them.

Abilene’s long-term health depends on the decisions we make today. Sometimes those decisions require difficult conversations, but they also demand accuracy, context, and empathy. The choices before city commissioners and staff aren’t about avoiding hard questions—they’re about investing in the community. I stand ready to answer any question residents and businesses have. 

Let’s remember what we decide now will shape the city not just for next year, but for the next decade—or even generation.

Respectfully,

Jon Quinday, ICMA-CM

Interim City Manager

City of Abilene, Kansas

419 N. Broadway Street

Abilene, KS 67410

(785) 273-2550