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City debt outlook under scrutiny

By Corene Brisendine

City commissioners are voicing displeasure with the projected city revenue and expenditures for the next five years.

During a Tuesday evening work session, finance director Bernie Hayen told commissioners that while the city’s overall debt will continue to decline, general obligation bonds are increasing. He said that “a growing community will continue to issue debt,” but that debt was manageable. He estimated the city would incur an average of $10 million in new debt a year, even as the total debt decreased.

But commissioner John Matta qualified Hayen’s proclamation that the city’s debt was “manageable,” saying that only applied so long as the commission continued to raise taxes to cover that debt. Matta said that solution was not acceptable.

Commissioner Jim Sherow asserted that the commission needs to find ways to reduce the general obligation debt because that is “putting pressure” on tax bills.

“A mill levy doesn’t matter so much to me as what I actually pay,” Sherow said. “What you have pointed out, and what is important to point out to everybody, it is the other variable in this—the valuation of your house.”

Commissioner Rich Jankovich pointed out that outside influences impact the city’s budget. He said the state legislature plays an important role in outside funding to the city, and there is a possibility the city will lose some of that funding in the near future, causing general obligation requirements to increase.

Commissioners also voiced concern with how the city’s portion of the recently approved sales tax extension would be used. Terms of extension of the half-cent sales tax require that 35 percent of the city’s portion go directly to debt reduction with 65 percent committed to economic development/infrastructure projects. Sherow said the language was too vague to ensure that the portion for economic development/infrastructure was used to that purpose. Mayor Loren Pepperd said if the city did not evaluate how that money would be spent, and designate a portion of the economic development/infrastructure portion to economic development; it would turn into a “slush fund” for all sorts of projects and no economic development would occur.

Pepperd reminded commissioners that it would be up to the next commission to decide whether to approve projects such as the airport expansion, an estimated $45 million project with a supposed cost of $11.5 million to the city—assuming the city receives about $33.5 million in federal grants. According to the projections, the city would increase its general obligation debt over the next five years by $21 million if it included the expansion.

Commissioner Wynn Butler said outside influences are adding to general obligations, and commissioners need to do more to control that spending.

One of those outside influences is the library’s proposed expansion project. Matta, who met with members of the library board, said the board members took a hard look at operating and employee costs over the next 10 years to see whether they could hold the mill levy down below 6 mills for the next 10 years in order to secure a $2.125 million loan through the city. The board determined it could hold that promise for the first 5 years, but after that, the operating and employee benefits would increase to a total of 6.85 mills. Butler said he would not be willing to support adding to the city debt unless the library board can find other ways to finance the project in order to keep their mill levy use below 6 mills.

Butler said the commission also needed to look at how much funding was going to “outside agencies” including social services and the D.A.R.E. program for the Riley County Police Department. Also, he said city employees’ travel expenses could be reduced.

He cited the recent Chamber of Commerce retreat in Kansas City as an example. He said 11 city employees attended that retreat, a participation level he thought it was too high. Pepperd said while he supported reducing spending, he did not want it to adversely affect those social services that depend on city funds to qualify for outside grants.

Sherow and Pepperd said that while the figures provided by the finance department were helpful in determining how much the city would be spending in the future, it would ultimately be up to the next commission to set the tone as far as spending and increasing or decreasing the general obligation debt. Pepperd said city general obligation debt, outside agency funding and project approval is something the current candidates need to be discussing with the public in order to “get a feel” for what the taxpayers want.

Finally, Pepperd said businesses in Manhattan on the Riley County side are still charging 8-1/2 percent sales tax. He wanted to remind business owners in Riley County the half-cent sales tax does not go into effect until May and they are overcharging. He said consumers also need to be aware of that.

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