Archive for Monday, March 19, 2012

Junction City asks state help on debt load

March 19, 2012


— Junction City officials responsible for pulling the military town away from clutches of bankruptcy are depending on Gov. Sam Brownback to sign a bill delivering a five-year extension of elevated municipal debt limits.

"Mistakes were made and tremendous errors in judgment occurred," city manager Gerry Vernon said. "We have waded through the muck. We have developed a plan."

He said action taken to raise local property and sales taxes, increase city fees, reduce the city payroll and reduce city operating expenditures might not be enough to sidestep financial collapse driven by a flawed effort to capitalize on the U.S. Army troop expansion at Fort Riley.

Sen. Roger Reitz, R-Manhattan, and Rep. James Fawcett, R-Junction City, said the Republican governor should sign into law a bill approved by legislators allowing Junction City officials to operate with unusually high debt limits.

"We have to," Reitz said. "We just have to."

Without modification to debt structure enacted by the state in 2006, Junction City officials would be prohibited from borrowing more than $50,000 for general government purposes now through 2016.

"The city's financial situation, while slowly improving, leaves little room for error," Fawcett said.

The bill approved with bipartisan support by the House and Senate would allow the city's debt cap to remain at 37 percent of property valuations into 2016 rather than resetting at 34 percent during 2013. The bill allows the city's debt ceiling to be no higher than 34 percent from 2016 to 2020, rather than dropping to 30 percent in 2016.

At the end of the decade, under changes contained in the bill, the city's limit would revert to the state standard of 30 percent.

"We have burdened Junction City residents and businesses to the maximum," said Vernon, the city manager. "There remain hurdles that must be cleared. Those hurdles are the debt limit thresholds. If they are not lowered, Junction City may stumble, may fall and may not finish."

Missing from this debt-reform conversation are declarations by Junction City leaders dismissing skepticism about accumulation of unprecedented municipal debt in response to the 8,000-soldier surge at the Fort Riley.

While serving as city manager in 2008, Rod Barnes claimed annexation of 1,400 acres into the city and issuance of $133 million in bonds to fast-track commercial and residential development should be celebrated.

Then-Mayor Mike Rhodes objected to criticism by people who doubted the decision to take advantage of state permission to raise the city's debt to 40 percent.

Barnes and Rhodes bet on a build-first strategy to attract thousands of 1st Infantry Division families redeployed to Kansas from Germany.

The city's goal was to foster spin-off economic growth and fuel a surge in tax receipts to finance expansion.

However, the national recession took hold. War raged in Iraq and Afghanistan. Demand from U.S. Army troops for off-base housing didn't fully materialize. Construction fizzled in new subdivisions fitted with water lines, sewers and streets.

Disenchanted residents formed the Junction City Taxpayers Association to sound a debt-crisis alarm. In addition to the city's escalating debt, local taxpayers were absorbing $30 million in bonds for schools and $34 million in bonds for the community hospital.

The Federal Bureau of Investigation launched a criminal inquiry into actions of a Lawrence housing developer and a Junction City politician. Michael "Mick" Wunder, a former Junction City mayor, was sentenced to 24 months in prison for taking bribes from David Freeman, who secured city development contracts with Wunder's help. Freeman was sentenced to 18 months in prison for conspiracy to commit bank fraud.

Junction City, meanwhile, nearly fell into bankruptcy. On Feb. 28, 2010, the city's accounts held $98,000 in cash to support a $37 million budget.

Junction City Mayor Pat Landes, elected to the city commission in 2011, said the city's financial position had improved following adoption two years ago of a 1-cent, 10-year sales tax hike dedicated to paying bond debt.

Last year, the city commission reduced staffing, trimmed department spending and approved a property tax increase to help balance the budget.

"Junction City residents have sacrificed a great deal," Landes said. "The spending spree is over and we now have an excellent staff in place to carry us forward."


Richard Heckler 6 years, 3 months ago

Boom Town for Lawrence Developers

Freeman also said Tuesday that he and Wunder helped another Lawrence company -

Lawrence Scuttlebutt

None of the imagined new growth took place which has left Junction City taxpayers holding the bag. When local government officials preach " we must plan ahead" grab your wallets.

It's time local taxpayers took charge. It's time to allow voters the opportunity to make final approvals at the polls once a year.

“Barnes was enthralled with this Freeman guy,” said Pete Robertson, a Junction City lawyer who worked with the Junction City Taxpayers Association, which raised a red flag about the city’s rising public debt and the activities of some of the developers."

jhawkinsf 6 years, 3 months ago

California has allowed for voters to have a say in a wide variety of issues. Their "proposition" style of government has voters approving or not approving a whole host of issues, from financial matters to public policy issues. Everything from Proposition 13 which is currently bankrupting the state, to public sector employee wages and benefits, which is bankrupting the state, to immigration policy, which is bankrupting the state.
Merrill - You frequently advocate for voters to have the final say on a variety of issues, especially those involving tax dollars. What makes you think the voters here will do a better job than the voters there? And wouldn't that be especially true considering Kansas voters have voted for a governor that you have frequently been critical of, as well as his party, which again, you frequently are critical of?

just_another_bozo_on_this_bus 6 years, 3 months ago

Isn't JC merely proof that unbridled growth is always good? You know, kinda like colon cancer?

jhawkinsf 6 years, 3 months ago

Just going on memory here, but didn't some of this involve a contractor bribing some public officials? Also, the contractor wound up going to jail, if memory serves. If my memory is true, then this wouldn't be an example of unbridled growth as much as a criminal enterprise. I assume we're all anti-criminal enterprise.

just_another_bozo_on_this_bus 6 years, 3 months ago

There is a very fine and largely meaningless line between the crony capitalism you describe, and that which has dominated local civic politics not only here but across the country over the last few decades--AKA, the race to the bottom.

jhawkinsf 6 years, 3 months ago

I've been in business for many years. That line is pretty clear. I've never run the risk of going to jail nor have I ever been fined because that line is so obvious. I don't know what line you're looking at or why you believe it's meaningless. All you have to do is compare what I told you with that guy sitting behind bars and know that line is very meaningful.

just_another_bozo_on_this_bus 6 years, 3 months ago

For some reason, I find no comfort in your naiveté.

just_another_bozo_on_this_bus 6 years, 3 months ago

Totally unrelated to the topic at hand-- if the JW wants to lose me (and likely many others, regardless of various political persuasions) continue the ads with annoying audio intrusions.

Patricia Davis 6 years, 3 months ago

It's time for the people (developer/funders) to take this in their greedy big boy shorts. This is a great example of unbridled capitalism when profit is to be made and whining to the government to bail them out when things blow up. Remember this is the part of Kansas that cuts its teeth on non government intervention.

Steve Jacob 6 years, 3 months ago

Bail out Junction City, you have to bail out everyone else.

brewmaster 6 years, 3 months ago

It bears repeating that many of the banks, developers, construction companies, investment groups and real estate firms that infested Junction City and caused that fiasco are from Lawrence. They schemed to make a quick buck in JC then scurried like roaches as their criminal misdeeds were discovered.

They have beguiled, colluded and scammed Lawrence in the same way for more than 30 years. Yet, they are often referred to as pillars of the community.

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