$2 million earmarked to reduce debt was spent on other items

By PHYLLIS ZORN

Staff writer

Anticipating a multi-million-dollar project to upgrade an aging and unreliable city power grid, Marion’s city council voted a decade ago to begin setting aside $200,000 a year to lessen the need for borrowing.

A decade later, the $2 million set aside is gone.

City administrator Roger Holter rationalized the decision Monday, telling council members state law required the money to be spent each year.

However, contacted after the meeting, a fiscal expert at Kansas Policy Institute termed Holter’s statement “insulting.”

“That’s absolute nonsense,” institute CEO Dave Trabert told the Record. “Cities and counties have reserves, and they have to have.”

Holter said the council would pass an ordinance setting up a repayment schedule for the full $4.3 million in bonds that Kansas Power Pool plans to issue on the city’s behalf in July to pay for the project.

The power pool appears to have the legal authority to issue bonds, which might require a referendum if the city were to issue them on its own.

Borrowing through the power pool might be legal, Trabert said Tuesday, but it does not sound ethical.

“To not get public input on a $4 million debt doesn’t seem responsible,” he said.

Trabert asked why the city wouldn’t trust taxpayers to have a voice in the decision. He said city residents should be engaged in decisions on how to spend, and repay, money for the electrical upgrade.

“You could pay for it by cutting back on other spending,” he said. “If you haven’t looked at that, you overspend.”

Trabert said if a city government doesn’t look at savings that could be made, it is saying there is nothing that could be done more efficiently.

Although Marion city council passed a vaguely-worded ordinance April 5 giving Holter permission to increase customers’ electric bills to cover a surcharge imposed by KPP, the council has not even discussed how it will repay as much as $4.3 million in bonds KPP plans to issue on the city’s behalf.

Those bonds, which KPP CEO Mark Chesney said he expects will be issued by July, are to pay for upgrades to Marion’s electric system to provide 12.5 kV service to its customers.

At KPP’s Dec. 11 board meeting, a resolution was passed declaring its intent to issue electrical utility revenue bonds to be used to upgrade the city substation and replace, install and relocate conductors, transformers, switch gears and equipment. The upgrade will include addition of a redundant 12.5 circuit for added reliability.

City administrator Roger Holter said city council members last summer approved him to work toward having the KPP issue bonds on the city’s behalf for the electric work. Besides issuing bonds, KPP would provide engineering services for the job, he said.

Because KPP is a larger entity than the city, Holter said, it has more credit and can issue bonds at a lower interest rate.

Council members will pass a resolution to pay for the bonds, Holter said.

In 2010 the city started setting aside $200,000 a year to work on the project in bits and pieces.

By now, that amount would equal $2 million. It has not been set aside for the purpose of paying off bonds.

“Municipal budgets grant spending authority on a year’s basis,” Holter said. “If money allocated is spent, it comes out of the allocated funds. If it is un-spent at year’s end, it remains in the unencumbered cash reserves of the fund and must be reallocated for the following budget year.

“I’m assuming you are under an impression that there’s a pot of money setting around for this project. There is not. Each year the elected officials determine where money is allocated based on their priorities. Funding and spending authority is valid for that one year period.”

Trabert said cities and counties have to provide services, but they have to do it at the best possible price for citizens.

The Policy Institute did a county-by-county property tax study, but not a city-by-city study. The study showed Marion County spent nearly $1,380 per resident last year. By comparison, Bourbon County spent $866 per resident.

KPC data shows Marion County property taxes have increased 265.6% since 1997 although the population has decreased by 13.8%. The mill rate has increased 87.7% over the same time span.

City taxes are additional to county taxes.

At Monday’s city council meeting, council members voted to request contractor bids for the work and to pay for materials themselves to avoid contractor mark-ups. They did not discuss repayment of the soon-to-be-issued bonds.