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Archive for Monday, September 19, 2011

Library expansion project raises the question of whether the city of Lawrence would violate its debt policy

Rendering of Lawrence Public Library entry on the south side. This view shows the southeast corner looking to the northwest.

Rendering of Lawrence Public Library entry on the south side. This view shows the southeast corner looking to the northwest.

September 19, 2011

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It is not exactly the high drama of the debt ceiling debate that took place in Congress this summer, but there is a debt question that is beginning to emerge at Lawrence City Hall.

Will the $18 million renovation of the Lawrence Public Library push the city out of compliance with its own debt policy?

“I think it is something we need to continue to monitor,” City Manager David Corliss said. “I don’t want us to go too far on debt, but I still think we have a lot of capital needs in the community.”

City leaders don’t yet have a definitive answer on whether the city will violate its debt policy when it begins issuing debt to refurbish the Lawrence Public Library. But the question came up last week as the city added $4.2 million worth of bonded debt to its books to pay primarily for a variety of previously approved street projects.

As part of that debt issuance, the city updated several sets of statistics related to its total debt. That included a calculation of how much general obligation debt the city has per capita. The city has adopted a policy that says the “amount of general obligation bonds outstanding per population will not exceed $1,100.” After the most recent debt issuance, that level has risen to $1,015.

Based on the city’s most recent population — as counted by the Census Bureau — the city could add only $7.5 million in new debt without exceeding the city guideline. The city is expected to add about $18 million in new debt for the library by the end of 2013. The city also has several large debt projects planned that are unrelated to the library. In 2012, the city is scheduled to issue an additional $9.6 million in general obligation bonds for projects including repaving of major streets, park repairs, and $4 million in infrastructure costs related to converting the Farmland Industries property into an industrial park.

The city would take on additional debt for non-library projects in 2013, but the city doesn’t have an estimate for that amount. Over the last three years, however, the city has averaged about $9 million worth of new general obligation debt per year. During that same time period, the city has been paying off about $10 million worth of debt per year, so the city’s total debt burden actually has been falling.

But that will change with the library project. Whether the change will create concern at City Hall, though, is an open question. City leaders note the debt policy is not a hard-and-fast debt ceiling, like Congress was dealing with this summer.

Instead, it is a city policy that can be set aside if city leaders so choose. The guideline also is just one of six measurements the city uses to monitor its debt. The city doesn’t appear to be on the verge of exceeding any of the other guidelines, although the policy is written in such a way that it calls for the city to meet all six of the measurements.

But the biggest point that City Hall leaders make about the issue is that the new debt is appropriate because city voters say it is. Voters approved at the ballot box the $18 million plan for the library, and the 1.5 mill property tax levy increase to pay for the new debt.

The issue of whether the new debt would put the city out of compliance with its own debt policy, however, was not raised during the campaign for the library.

The debt policy also does have practical implications. Ed Mullins, the city’s director of finance, said the guidelines are meant to help the city maintain a high credit rating, which in turn lowers the city’s borrowing costs.

“It helps us look at things in a way that Moody’s (the credit rating agency) is going to look at things,” Mullins said.

The guidelines have been successful on that front over the years. The city recently was reaffirmed as having an Aa1 credit rating, the second best rating that Moody’s offers on debt.

How much Moody’s pays attention to the per capita debt totals is hard to estimate.

The debt guideline issue may be one that comes up again at City Hall. The city is expected to have a debate at some point of whether to add new debt to build a West Lawrence Recreation Center, in addition to more debt for streets, the Farmland property, fire truck purchases and other projects.

Corliss said he may want to look at the debt policy and make sure it is updated for today’s environment — for example, he’s not sure when it was last adjusted for inflation. He said the city needs to be mindful of how much debt it issues, but he believes the city probably ought to be issuing slightly more debt than it has been. He said that’s because the city has a significant list of projects it needs to tackle in terms of maintenance and on the economic development front. He also said interest rates have put the cost of borrowing money at historic lows.

“There may be times when it is appropriate for a community to stretch itself a bit when it comes to capital improvements,” Corliss said. “I think we may be in one of those times.”

Comments

LHS56 3 years, 3 months ago

Nice we were made aware of this situation prior to voting on the library. not!! Enough is enough. We need to start realizing there is a difference between want and need.

roadwarrior 3 years, 3 months ago

they assumed you knew....lol. we do need to start realizing a difference between want and need and also, between cosmetic and functional. Our library is great...its greatness is on the inside. sorry Fritzel/Treanor, times are tough all over.

cato_the_elder 3 years, 3 months ago

"We need to start realizing there is a difference between want and need."

Very, very well-stated.

Hadley_says 3 years, 3 months ago

I support debt for unique and one-time projects like the library or farmland.

But the annual use of debt to support street repairs is a foolish one, because new expenditures for ongoing street repairs should be made each year. It is like living on a credit card. Having said that, I think street repairs are still underfunded in parts of town.

fu7il3 3 years, 3 months ago

The problem is that they aren't even one-time projects. They have a new one-time project every year, whether it is the train depot, the library, Farmland. Our city is obsessed with projects.

conservative 3 years, 3 months ago

The city never should have gotten involved in the farmland site. There were private corporations willing to take on the risk of reclaiming that land and it would not have cost the city much to oversee making sure they complied with environmental laws. Anyone remember the line the city kept spewing that all the costs of the cleanup would be covered by the funds left in escrow by farmland? So why did we have to issue 4 million in debt for the project? stop the library project, skip the rec center, and focus on projects that actually need to happen until the economy recovers.

Steve Jacob 3 years, 3 months ago

A private corporation did such a good job cleaning up the Sunflower Ammo plant land.

chootspa 3 years, 3 months ago

Yes, my kids enjoy playing at that theme park all the time. It's such a tourist draw!

esteshawk 3 years, 3 months ago

Who is really putting money into Lawrence? There'ye called "students" - and there are about 25-30K of them each and every year, along with visiting parents, and all those sports fans that come to football and basketball games.

nschwerm 3 years, 3 months ago

whats wrong with the library now? I haven't been there in a few years but it had everything a library needs right? Who even cares about the library anyways I would rather vote to close it down for good, spend the money bringing the entire city free gigabit ethernet.

Richard Heckler 3 years, 3 months ago

J-W editorials

July 9, 2010

The idea of using sales tax revenue to pay for at least part the proposed Lawrence Public Library expansion deserved more consideration than it received from Lawrence city commissioners Tuesday night.

Before commissioners voted to place the $18 million expansion project on November’s ballot, they were asked to consider using all or part of the city’s share of the 1 percent county sales tax to pay for the project. Using the sales tax would have reduced or eliminated the need for a 1.5-mill tax increase for 20 years to pay for library construction and a permanent 0.5-mill increase to cover additional operating costs for the new building.

Commissioners, however, dismissed the sales tax idea saying that voters who approved the sales tax expected that money to be set aside for parks and recreation projects. Although it’s true the sales tax was sold to voters at least partially on that basis, the actual ballot questions put no restrictions on how the money would be used.

However, even if the sales tax revenue was specifically restricted as being for recreation, it isn’t much of a stretch to justify the library as a recreational effort. The library may offer fewer physical activities than a recreation center, but many people certainly would consider the movies, books and other library classes and events as recreational activities.

There’s no reason the sales tax needs to be permanently dedicated to building new recreation centers or playing fields especially when the city’s population isn’t growing significantly.

It would be especially appropriate to use sales tax revenue to fund the ongoing operating expenses for the larger library rather than permanently raising property taxes by 0.5 of a mill for that purpose. The 1.5-mill levy could be used for 20 years to fund the expansion and then eliminated.

Even some taxpayers who support the library expansion are concerned about increased property taxes, especially in the current economy. Shifting part of the expense of the expansion to the local sales tax might have mitigated some of that concern.

It’s too bad city commissioners weren’t willing to get a little more creative in their library financing plans.

Richard Heckler 3 years, 3 months ago

Plan B introduces a fiscally responsible taxpayer friendly proposal. Options the city can live with which include no increase in taxes. Hats off to this concept.

The one cent sales tax that was approved in 1995 can generate up to $14,036,301 as of 2009. Obviously more in better years

The city portion of the county 1% sales tax can generate up $8,609,331 as of 2009 obviously more in better years.

The two together = $22,645,672 again obviously more in better years.

Let’s ask voters to dedicate 10% of this to finance our library reconstruction and future operations.

Choice: Dedicate 10% of 1995 sales tax revenue to library reconstruction and future operations

A. City/County tax revenue combined using 10% annually = 2,264,567. 20 for 10 years = project paid off with existing sales tax revenue

B.City sales tax only using 10% annually of city tax revenue only = $1,403,630.10 for 15 years with existing sales tax revenue

Voters were never offered this opportunity!

Scott Morgan 3 years, 3 months ago

Corliss said he may want to look at the debt policy and make sure it is updated for today’s environment — for example, he’s not sure when it was last adjusted for inflation.

Just let this sentence sink in.

Richard Heckler 3 years, 3 months ago

Sometimes this pool of money becomes a pool for pork barrel spending like buying land where developers have bought property for future park development and/or extravagant spending for high dollar rec centers that are not necessary.

Developers should be funding the land as in setting enough aside for parks. After all developers are ones FORCING the building of new neighborhoods. I speculate the lions share of taxpayers believe Lawrence needs no more neighborhoods for a few years. They have become a drag on the economy because of not generating enough revenue to cover what they demand from the city which is a lot.

As for the new library I say let's call on the city commission to consider doing = Dedicate 10% of 1995 sales tax revenue to library reconstruction and future operations. It's OUR money.

nativeson 3 years, 3 months ago

The issue is not the library bonding. It is directly funded with a voter approved mill levy increase. A review of bonding for all other projects now being undertaken by the City is the real issue. The library project simply triggered the exposure.

The City needs to have a real discussion about the bond and interest fund. It has been projected for years to begin to be depleted based on the amount of debt that is being serviced within the fund. The 7 mills now being levied to service debt is not enough avoid the fund beginning to be reduced over the next few years.

One issue that should clearly be reviewed is bonding of street projects that are now being funded with the infrastructure sales tax. Will any of the debt service exceed the intial sunset period for the sales tax approved several years ago? If so, and the sales tax is not renewed it will fall back on property taxes to fund the remaining outstanding debt.

That being said, the GO bond level set as a policy not to exceed $1,100 per resident may not make as much sense as it once did given recent voter approved sales tax for infrastructure and fire equipment as well as the library bond issue.

Richard Heckler 3 years, 3 months ago

This sounds a bit like Reaganomics borrow and spend which of course became ever so reckless.

Don Whiteley 3 years, 3 months ago

What debt policy? Liberals have never before worried about debt policies. Why should they start to care now?

CountyResident 3 years, 3 months ago

When did conservatives worry about debt policies? Just look back and see how much the federal debt increased under Presidents Reagan and Bush II.

rtwngr 3 years, 3 months ago

Who cares who borrowed what and spent when?!!! Enough is enough!!!! Whether we are talking GOP or Democrat, the idea we can spend what we don't have needs to come to a screeching halt at the city, state, and national levels! I am sick to death of one party saying, "it's their fault" and then doing the same thing they accuse others of doing. Yes there's enough blame to go around but that will not solve the issue of spending money that the government does not have.

chootspa 3 years, 3 months ago

"You know, Paul, Reagan proved deficits don't matter.... We won the midterms (congressional elections). This is our due." - Dick Cheney

KS 3 years, 3 months ago

Please, please don't build that ugly thing! Where do these folks come up with these designs? This will be a dated building before it is complete. Oh, so ugly. Merrill, when you say, " It's OUR money", you sound like a conservative. Shame on you!

John Hamm 3 years, 3 months ago

Watch Monty Python's "Spam" but change the word to "Spend."

Godot 3 years, 3 months ago

Now that this new information has come to light, a new vote is in order. I wonder how many people would vote yes on borrowing $18,000,000 for a destination community center/library/parking garage if the question began with, "To increase the city's debt limit from $1,100 to $2,200 per capita, with the potential of doubling the property mill levy and putting the city's financial rating at risk at a time when the City plans to borrow millions more for sewer, roads, a new parks and recreation center, capital improvements, and restoring Farmland into a business incubator....."

Cant_have_it_both_ways 3 years, 3 months ago

You are very correct. This library has huge questions around it. I understood that if they could provide 150 computers, then they get reclassified, thus their workers justify and become entitled to raises. The parking garage is part of the empT covert plan to provide a central hub for the money pit that very few benefit from. After the empT came about, now we are blessed with a $4 million repair facility, forget the costs of the new green busses, and now this central hub.

If you remember, the public transportation system was attached to property taxes. It was shifted to a sales tax and we were not provided with property tax relief. The city just absorbed the windfall and funded raises for city employees.

This whole public transportation system is full of bait and switch, covert operations and continues to be a huge money pit. It is time to put a stop to its growth. The city continues to fund things that attracts those who can't pay their bills on the backs of those who work.

Gedanken 3 years, 3 months ago

The library wouldn't be reclassified. After the expansion, they would meet the requirements for the type of library they had been claiming they were all this time. They said it was so they could continue to secure grants from the library system. However, when asked if they had ever been refused a grant because they didn't meet the requirements - the answer as 'No'. It was just a fear they had. We voted for a $18 million dollar expansion to alleviate fears that the library might miss out on couple hundred thousand dollars a year grant.

You know where that couple hundred thousand dollars a year comes from? Us - the tax payers. We are spending $18 million to get back a couple of hundred thousand of our own money. Doesn't make any sense to me at all.

jafs 3 years, 3 months ago

Also, we would still have met the standards for the second highest level of accreditation without the expansion.

Somehow, that wasn't made clear in the promotional materials, which implied we'd lose our accreditation, which isn't true at all.

esteshawk 3 years, 3 months ago

That's ridiculous. Either people are willing to increase their taxes or not. Every homeowner should know how much they pay in taxes each year, and the vote should be kept to the issue at hand: do you want to increase your taxes by x-amount for y-time to pay for a library overhaul?

A city policy should not have any effect on that. Adding that type of information only confuses the mostly ignorant masses (a Republican strategy - keep people afraid). Keep it simple, stupid.

jafs 3 years, 3 months ago

Actually, I agree with Godot.

In addition to the narrow issue, people should be aware of the larger consequences of our votes.

If everything is kept too narrow, there's not enough focus on the big picture.

At the very least, people should have known that the library expansion might result in a significant increase of our overall debt, and push it beyond currently acceptable levels.

chootspa 3 years, 3 months ago

I agree. Now that new information has come to light, let's have a new election for Brownback. Oh wait, we only get new elections when you don't like what's happened. The rest of the time it's all "elections have consequences," isn't it?

CountyResident 3 years, 3 months ago

Holy cow. I thought only the federal government had deficit spending. It is often said that Kansas governments have balanced budgets.

CountyResident 3 years, 3 months ago

Thank you for making my point. You are correct that everyone has deficit spending. That why it is silly for Congress to add a provision to our Constitution the that will require the US to have a balanced budget. This amendment will prevent the federal government from borrowing any money, ever again. Not to build a road or to buy a weapon or for any other reason.

irvan moore 3 years, 3 months ago

i betcha they just raise the limit, this commission doesn't care about the taxpayers, they just care about downtown interests.

bd 3 years, 3 months ago

New library, new theater, new sports complexes, school closings????

GMom05 3 years, 3 months ago

Throw a football field in there and sign us up! We only need the schools so we can have sports teams to support!

Kontum1972 3 years, 3 months ago

the debt policy....?

Government is the problem....!

screw the garage, park on the street..the only time the parking garage is full is when it rains or snows.... mb the CMgr needs to give up his next raise....as a sign of good fiscal leadership.

LoL...fat chance of that...

TheBigW 3 years, 3 months ago

Don't blame me I didn't vote for the damn thing!

fu7il3 3 years, 3 months ago

No one has brought up the obvious. That picture has way too many people walking in and out, and not a single homeless person.

breeze 3 years, 3 months ago

I don't understand why the City is so poor. There are plenty of expensive properties to tax in Lawrence. Yet, it seems that the City is too poor to fix sidewalks (let the homeowner do it!), too poor to fix streets, too poor to have a library adequate for its population. What gives?

Sally Piller 3 years, 3 months ago

The timing of this project is just so bad and not just for financial reasons. The technology concerning books and information is changing so rapidly that I'm afraid that the library design will be outmoded very quickly. Is there any way to stop this?

Sally Piller 3 years, 3 months ago

The timing of this project is just so bad and not just for financial reasons. The technology concerning books and information is changing so rapidly that I'm afraid that the library design will be outmoded very quickly. Is there any way to stop this?

ralphralph 3 years, 3 months ago

It's not the bait, so much, as the switch.

blindrabbit 3 years, 3 months ago

Offset some of the debt by selling Hutch. for Polaris Rocket for the Space Museum. Since they want it, we should be able to really run the price up quite high. Just think what it will do for our image as a peace loving community; and also eliminate the possibility of either Uranium-235 or Plutonium-239 leaking from that bird. If they remove the warhead when they move it, the U.S. will gain some more advantage in the START count with the Soviets.

I can see a win all the way around on this.

amac 3 years, 3 months ago

I did not vote for the library. Families have so many resources available to them beyond the brick and mortar library walls especially in this college town. I WOULD like to know if we can pay extra to the workers on the bridge to/from North Lawrence to finish earlier...MUCH earlier! Completely different forum, but I get tired of North Lawrence being alienated from the rest of the City. Yes, of course, I could move. yours truly, NL Sandrat.

jesse499 3 years, 3 months ago

Funny how this new info always comes out after the vote isn't it.

kernal 3 years, 3 months ago

"...too poor to have a library adequate for its population." What is it about the library's current status, other than not enough computers for residents and the homeless, that's inadequate for Lawrence residents?

The only time parking is occasionally a problem is week-nights and week-end afternoons when pool patrons are using the Lawrence pool during our short swim season of three months. If our library doesn't own a book or video that you want, they have the interlibrary loan program. Please enlighten me as to where the inadequacies are.

Richard Heckler 3 years, 3 months ago

Borrowing perhaps is not the problem necessarily..... it's how the money is spent.

Our city's current high cost of living could easily be tied directly to infrastructure expenses needed to serve new housing and retail developments. The community is way over extended in this regard. Massive home building and over loading the retail market is not sustainable = not a smart economy to blindly chase.

If residential growth paid for itself and was financially positive, we would not be in a budget crunch. But with increased numbers of houses you have increased demand on services, and historically the funding of revenues generated by residential housing does not pay for the services, they require from a municipality = not a smart investment.

If however the city were chasing new clean industry that provide good jobs for the long term which does not require a constant infusion of taxpayer dollars thus reducing the size of a home building and retail economy that's always requesting tax dollar infusions. This would be wise investing and providing a break to taxpayers.

beaujackson 3 years, 3 months ago

In hindsight, it appears that voting on the Library was premature, because of unknown facts.

Another vote is in order.

Leaving the present library "as is" may be the best option for taxpayers.

lawrencenerd 3 years, 3 months ago

That 18 million could be spent on giving every person in Lawrence a taco a day for a year. Seriously, I think the tacos would be more useful to me.

Richard Heckler 3 years, 3 months ago

There are plenty of clean collar jobs that are working = reducing the impact of toxics:

  1. Librarians
  2. Bicycle related industries
  3. Organic Landscaping
  4. Organic Farming
  5. New Cleaner Energy related industries
  6. Building energy star homes such that Tenants to Homeowners produces
  7. Weed pulling instead of spraying toxic chemicals
  8. Building Hybrid transportation
  9. Organic Food Producers
  10. Seven Stars Farm
  11. Production and Installation of 97% HVAC systems
  12. Most anything related to water conservation
  13. What is the largest obstruction to a ton more jobs in the cleaner energy industry? The toxic coal and nuke power industries that never give up their billions in pork barrel subsidies.

BTW: The insurance industry won’t insure against nuclear power plant accidents. Nuclear power plant operators rely on a government-backed "Price-Anderson" insurance scheme that limits their liability in the event of an accident or attack.

gl0ck0wn3r 3 years, 3 months ago

Green jobs = reckless spending. Why do you hate the environment, Merrill?

Richard Heckler 3 years, 3 months ago

IMO it is always best to maintain existing resources such as libraries and improve the existing structures. Libraries and schools are investments.

Rather than ignore and allow structures to waste away such as so many landlords do. Lawrence is severely infested with slumlords and it seems that USD 497 has joined the ranks. The school district refuses to maintain their responsibilities. I would rather the library receive a rehab on the current site without that additional parking.

Most of us grow up with the concept that it pays to maintain property. Let's apply this thinking to the city,county and USD 497.

beaujackson 3 years, 3 months ago

ONLY PROPERTY OWNERS SHOULD BE ABLE TO VOTE ON BOND ISSUES REQUIRING TAXING PROPERTY.

jafs 3 years, 3 months ago

Ok.

But if and only if property owners pay all of their property taxes without passing them on to tenants, customers, etc.

George Lippencott 3 years, 3 months ago

This seems a poor way to discuss what is an appropriate level of debt for our fare city. I am sure there are guidelines that various responsible entities offer. It would seem prudent if the LJW in conjunction with our law givers shared some of those thoughts. I hate abstract discussions. They generate heat and little light.

I would assume lending entities look at the total indebtedness of the tax base and not just at each tax entity in isolation. Maybe not but that would seem to be a good way to frame this topic.

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