The bill has come due for years of underfunding the city
For decades we have significantly underfunded our community. While we enjoyed some of the lowest taxes in the region, our infrastructure, our streets, our facilities, and our parks were in decline or outright failing resulting in scores of legacy time bombs exploding around our hometown. The bill has come due.
Over a year ago I made a promise to all Augustans that we would spend the next 24-36 months making over and revitalizing our hometown. We’ve started delivering on that promise. I’m confident you’ve visited our Shyrock Park, home to our new splash pad and restored “Castle Park” playground. While there, you were certain to appreciate the new restroom facilities, the paved and extended parking lot, the additional walking paths, the new fully-signalized crosswalk at Ohio, and several fishing docks surrounding our beautiful Augusta City Lake. Shyrock Park is now a destination location and a point of pride.
As part of our Pride and Progress Initiative, we’ve nearly completed Phase I of improving the amenities in our hometown. Pride and Progress was the answer to many long-term wants of most Augustans. Remember, the citizens of Augusta voted overwhelmingly in support of Pride and Progress and I sincerely hope you’re beginning to realize it’s okay for us to have nice things.
Speaking of nice things, you had the pleasure of driving through the construction last summer on 7th Street, our primary east/west corridor. And based upon several comments on various social media platforms, you’re thoroughly enjoying the full reconstruction scenery along the South Ohio Street project, our primary north/south corridor, continuing our current focus on improving our main arterials.
As we continue our progress, I wanted to update Augustans on future expectations in part by addressing citizen comments during our August 7th public hearing for the proposed 2018 budget. While council members answered several questions, it was impossible to answer all of them.
In an effort to fully respond, city staff prepared a detailed and fact-based presentation answering as many questions as possible. If you were unable to watch the August 21st council meeting, the recording is available on the city’s webpage along with the presentation. Additionally, prior to each meeting, every city council agenda packet, every work session packet, and every budget document are made (and remain) available on our webpage, www.augustagov.org. Understanding how busy Augustans are, I’ll highlight a few themes from the budget presentation.
During the public budget hearing one citizen suggested we are a community “drowning in debt.” We aren’t. In fact, the city has only committed 33% of our statutory debt limit to finance city projects, up approximately 2% from prior years due to short-term bond issuances for the Pride and Progress Initiative and Street Improvement Plan. In comparison to other similarly-sized Kansas communities, our total bonded indebtedness is about average.
Another way in which we measure Augusta’s financial condition and debt outlook is through the independent Standard & Poor’s Global Ratings service. Augusta achieved an AA- rating from S&P a few years ago. According to the rating agency, an “AA- rating indicates a strong capacity to meet its financial commitments and differs from highest rating only to a small degree.” Our bond rating has been reaffirmed multiple times, including with our most recent bond issues. Fortunately, our most recent bond issues occurred at the lowest levels we’ve seen in the history of the bond market.
Based on the comments made during the public hearing, the mere use of bonds or “debt” seems to have a negative connotation in the minds of some citizens wherein the city is perceived as “living beyond its means.” This is simply not the case. What is important, however, is that the city makes certain to utilize bonds strategically in accomplishing our vision and goals and not utilize them needlessly or to excess.
Bonds are a financing mechanism for cities analogous to the financing strategies utilized by our average citizen. For example, the vast majority of your neighbors likely have a car loan or home mortgage. Some of the speakers during the public hearing in fact discussed the impact of property taxes on their own mortgage. The vast majority of businesses in our community probably took out a loan or line of credit to start or grow their business. Are they living beyond their means simply because they could not pay cash for these large investments? Not necessarily. In fact, many Augustans likely worked with their bank to determine an affordable loan amount and scaled their car or home purchase accordingly. We work with our financial advisors the same way.
While we are using debt to supplement the Pride and Progress Initiative, we’ve also issued debt to completely upgrade our solid waste fleet while implementing single-stream, curbside recycling. As a reminder, this debt issuance is paid for by revenues generated from solid waste service fees and is not paid by property taxes. This strategy has allowed the city to hold the line on residential trash rates since 2012.
Infrastructure investment is one of the city council’s highest priorities and staff worked in developing a financing strategy allowing for major infrastructure investments. One area of strategic importance is our sanitary sewer lines. The city was successful in our application for a $500,000 Community Development Block Grant to repair sanitary sewer lines in Basin A (south of Kelly, west of State) leveraged by a twenty-year loan with a fixed interest rate of 1.81%. Like a line of credit, the fixed-rate loan amount can be adjusted over time providing flexibility for the city to continue financing future sewer line improvements in other basins. These payments are made with existing wastewater utility rates and fees and not paid by property taxes.
Another recent debt financing was the three-year temporary note issue for streets projects. This new strategy was discussed by the Street Sales Tax Committee and approved by the City Council. Instead of approving street maintenance projects one year at a time, they are now planned as three year packages allowing the projects to be larger in scale, thus attracting better pricing from contractors, as well as providing time for improved planning and coordination between necessary future utility repairs and street resurfacing. The temporary note will be paid off in three years from Street Sales Tax proceeds and is not property tax supported.
During the public budget hearing a citizen commented, “The city is circumventing the public vote requirement that was passed by the state legislature. If the taxes exceed CPI there must be vote.”
The statement was inaccurate. The Kansas Legislature included a broad range of exemption provisions resulting in a complex calculation form that determined our computed limit for taxation. While I won’t detail each of the exemptions, included in the lengthy list are: certain bond and interest payments, expenditures specifically mandated by federal or state law, and expenditures used exclusively for increased law enforcement, fire protection, or emergency medical services.
Also during the public budget hearing a citizen remarked, “Taxes went up 8.9 mills last year. That figure was a twenty percent increase. Who does that?”
The simplest answer is: Every other community around us. Only most communities did it decades ago, or they did it incrementally over decades. Again, until 2017, our community had one of the lowest city mill levies in the region. Now, we are average.
Finally, a citizen expressed concerns about the Mulvane Water Contract and the El Dorado Waterline stating, “Negotiations are at a standstill with El Dorado and also Mulvane. Voters passed a ballot vote to construct a new waterline and diversion project…now it’s 2017 and the projects are at a standstill.”
During the staff presentation at Monday’s meeting, our city manager stated, “This is the most exhausting ‘standstill’ I’ve ever been a part of.” Many Augustans are likely aware that after years of discussion with Mulvane, the City of Augusta engaged Mulvane in a lawsuit. As part of that lawsuit, staff has provided upwards of 15,000 pages of documents, deposed expert witnesses for testimony, and our city manager has been deposed twice, once for more than eight hours. At this point, we are awaiting next steps, whether they be a trial, appeals, or possible court judgments.
Since voters overwhelmingly approved the one-cent sales tax for constructing a new El Dorado waterline, we’ve continued the design process. We’ve changed the routing avoiding the El Dorado refinery as well as railroad right-of-way. We’ve adjusted the line size better serving Augustans and our regional water partners for the next 50-60 years. And, we’ve engaged in several regional discussions as we plan our water future. We’ve learned from the mistakes of the past. We have no intention of rushing this expensive, high-priority project with the possibility of erring at the expense of future generations. We expect to get this right.
Coincidentally, for those citizens concerned about debt, we have accumulated $3,596,916 in our water sales tax fund. That means, when the time for construction comes, we will have a significant down payment on our project and will issue less debt.
Following the public budget hearing, I had a life-long Augustan message me the following:
“I was also raised in this town, as was my mother and, for the first time ever, I am just now feeling some pride in saying that I live here. For so long the town has simply "existed". Thanks to previous generations, my generation, as well as my children's, are now having to pay the price for their prosperity; doing all the things left undone by not paying their fair share. Builders can build as many houses as they want, but if there are no amenities, the people we want living here will not come. Our Chief of Police once shared - several years ago - that we have a higher population of drug and sexual offenders because of our low taxes. I don't know about everyone else, but I'd sleep better at night knowing we've priced ourselves out of that market! Thank you, and the rest of the council, for not taking the easy way out.”
Like you, I’m deeply concerned about taxes. I worry about what’s too much. But I want you to know it’s not all doom and gloom. Over the next few years, by 2022, we will retire several long-term debt issuances freeing up $1,792,450 annually. This will afford future councils the opportunity to increase wages and benefits attracting and retaining skilled utility workers. The bulk of the funds should be reinvested into necessary infrastructure projects continuing our progress towards overhauling our community. And there is certainly potential for property tax relief.
For now, the bill has come due. As mayor, and with the support of our council and our staff, we will do everything we can making Augusta a community of choice. We will continue on our path improving our infrastructure while simultaneously adding amenities enjoyed by everyone. Augustans should expect Phase II of our Pride and Progress Initiative to begin soon, including upgrades to baseball and restroom facilities in Garvin Park, a new Public Works facility, as well as a new dog park located in our Meadowview Acres. I want you to be proud of Augusta.
And yes, we will continue with road construction.