LJWorld.com weblogs Town Talk
Douglas County tries to explain why ballot language for jail, mental health projects doesn't include a dollar amount or debt cap
Hopefully this doesn’t happen to you every day, but it is conceivable that someone you know may ask for your permission to take out debt that you will be partially responsible for repaying. If so, two natural questions probably spring to mind: For what and how much?
Douglas County residents are going to be put in that position this spring when county commissioners ask for approval of a half-cent sales tax to fund a jail expansion and mental health project. When voters open their ballot (it is a mail-in ballot) it generally will explain what the county will use the money for, but nowhere in the ballot language will there be a dollar amount of how much debt the county intends to take on as part of the project.
That omission creates the possibility the county could issue debt that exceeds the dollar amounts that have been publicly discussed thus far. It also is creating questions from some readers about why the county is refusing to list a dollar amount in the ballot language. I’ve asked county officials about that and have done some digging on my own. Here’s a look at the issues:
• State law doesn’t require the county to put the dollar amount on the ballot, but the county could if it wanted to. The past several bond issues in the community have included dollar amounts. The school board puts dollar amounts in the ballot language when it seeks approval for school bonds. In 2010, the library expansion ballot included an $18 million cap on the amount of bonds that could be issued. In 2014 the city sales tax ballot for a new police headquarters included a $24.2 million cap on the amount of bonds that could be issued. But, it also would be incorrect to say this lack of a dollar figure is unprecedented. When voters in 1994 approved a countywide one-cent sales tax to fund construction of the jail, among other projects, the ballot language did not include a dollar amount on the bonds.
• The county wants to provide itself the most spending flexibility possible. As the Journal-World has reported, the county currently believes the jail will cost about $44 million and the mental health campus will cost about $11 million to build. Thus, the current estimate is the county will need to issue about $55 million in bonds. But Douglas County Commissioner Nancy Thellman told me there is a concern the numbers could grow higher.
“Costs are changing rapidly even as we speak, and if we put a not-to-exceed number on these projects, we may find ourselves hamstrung at the very moment we need to bid them and put that first shovel in the ground,” she said.
By not putting a cap in the ballot language, rising costs become less problematic. But, how high could the project go before the county commissioners would go back to the drawing board? I’m sure there is a number that would cause county officials to balk, but when I asked this week, no one gave me a specific dollar figure.
County voters will have to decide their comfort level in not having a built-in cap as part of the project. It is important to understand how the cap would function. It would not prohibit the county from building the project if, for example, costs for the jail came in at $44.5 million instead of the $44 million. The cap is only on the amount of debt it can issue. Like most governments, the county has cash reserves it can spend to make up the difference, and it also can rearrange its budget to free up cash to make up the difference. However, such budget changes could involve cuts to other county services. Some voters may be more comfortable letting the county operate without a cap rather than worrying about what services they may cut, if they had to make up a shortfall.
• The proposed sales tax can, theoretically, fund quite a bit more debt than $55 million. The half-cent sales tax is projected to generate a little less than $10 million a year. Only about $3.75 million will be spent each year to make the payments on the bond. The rest will be spent on operating costs, primarily for the mental health project, but some for the jail. If the county finds a way to reduce those operating costs, the ballot language would allow the the county to apply those savings to fund a larger bond issuance. In very rough terms, every $1 million in cash from the sales tax can fund $10 million to $13 million in debt at 4 percent interest for 20 years.
• The spring election is about more than just a sales tax. It would be easy to think that this issue of a debt cap does not matter because the end result will be the same: The sales tax rate you pay will be a half-cent higher regardless of how much debt the county issues. If everything goes according to the county’s plan, that will be true. But the county also has to have a backup plan, and it technically is asking voters to approve that plan. The county fully intends to only use sales tax dollars to pay off this debt. It must even conduct a feasibility study before issuing any bonds to confirm future sales tax revenues will be enough to pay off the bonds.
But ... predicting future sales tax revenues is like predicting the weather. If the economy takes a downturn and sales tax revenues decline to the point there is not enough to pay the debt, the county will be obligated to use property tax revenues. The resolution the county has approved spells that out by saying the bonds are “payable from and secured by the proceeds of the sales tax, and if not so paid, from unlimited ad valorem taxation within the county.” That means the county could raise its property tax rate or cut other county services to free up cash to pay for any shortfall.
It is important to note that all the county officials I talked with said they weren’t trying to be deceptive by omitting a dollar figure from the ballot language. They’ve obviously talked about the dollar costs in public meetings, and they will be required by state law to make a more specific estimate soon. The county must run a legal notice in the Journal-World detailing the amount of bonds expected to be issued, the projected interest rate and other such details. The Journal-World, of course, will include those details in our coverage.
But this issue is highlighting how spirited of an election this could be. Already, the county is having to answer questions that really don’t even help voters get to the heart of the matter. First there were voter questions about why the project couldn’t include two votes, one for the mental health part of the project and one for the jail part of the project. Now, county officials are answering questions about why there isn’t a dollar cap.
County Administrator Craig Weinaug told me the county does need to make sure voters don’t lose sight of the major issues the county is trying to address: an overcrowded jail and a lack of mental health services in the community.
“We need to be able to focus the public’s attention on the needs we have, how we can minimize incarceration, and how we can provide better mental health services,” Weinaug said.