The Kenig Konnection
A Budget that Could Determine Our Future
I hope you and your family are enjoying the summer.
If you are a new subscriber, please do not be intimidated or deterred by the length of this newsletter. This is a special report on the budget, is extra-lengthy and does not represent my typical update.
Amidst the pool parties, Royals games, team sports, and summer vacations, the Council has been deep in budget sessions, reviewing 2016 expenditures and the 2017 proposed budget that includes funding for all city departments. I will do my best to recap the situation before us and the major choices we face in continuing to have the capabilities to provide for core city services our city's residents demand and expect.
All of this culminates with a public hearing next Monday, July 25th at 7:30 pm at City Hall where we will vote on approving the 2017 budget and consider a possible mill levy increase.
The Budget Facts
- Total 2017 "base budget" for the City of Shawnee as originally presented at our 5/17 council committee meeting: $101,506,324. This includes expenditures and fund balances for all funds.
- The 2017 base budget represents a minuscule 0.06% increase over the adopted 2016 budget, although the proposed, 2016 revised budged actually turned out to be $105,028,693, with a higher ending fund balance than projected due to lower expenditures in 2015 - General Fund expenditures were 4.6% less than budgeted. The savings were primarily due to gasoline/diesel costs reaching unprecedented lows during much of 2015, mild weather that saved money on snow removal and utilities, various staff vacancies during the year, and general cost saving strategies.
- Our debt payments have decreased as more of our debt has matured, thanks to a disciplined approach to initiating debt-funded capital projects. Our borrowing rates have also remained stable due to market conditions as well as the city’s impeccable Aa1 bond rating.
- The total 2017 budget as published in the Notice of Budget Hearing (with the 2.44 mills and the increased stormwater fee) is $105,253,081.
- We ended 2015 with an ending fund balance of 51% - well above our city policy of maintaining a balance of at least 30%. Our forecast calls for a gradual decline in our fund balance as we pump more funding into street and stormwater projects, but we will strive to always maintain a balance of at least 30%.
- In 2017, our projected revenues will come from:
- Sales Tax: 37%
- Property Tax: 31%
- Permits, franchise taxes, hotel guest tax, transfers & other fees: 32%
Revenues We Collect...
What We Fund with Those Revenues...
- Sales tax collection so far this year is flat-lining or down, depending on the month
- Franchise taxes (gas portion) are also below what was budgeted this year, due to the mild winter this past year.
Unmet Needs & Challenges
With total revenue flat-lining and in some cases declining, the city has critical, core needs that need to still be addressed.
Crumbling Stormwater System
In prior newsletters, I detailed the deteriorating state of our over-30-year old stormwater system, of which nearly 57% is comprised of corrugated metal pipe that is beyond its expected lifespan and needs to be replaced with reinforced concrete piping.
In prior email updates, I detailed recent emergency repairs. Recent pipe failures earlier this year have resulted in emergency repairs at Holiday Drive near the Deffenbaugh landfill and at 73rd and Quivira. These two emergency repairs alone totaled $1.3 million, which is why we need to address our aging pipes before they fail and become extremely costly to repair.
Why is this such a critical issue?
The current annual stormwater maintenance budget of $2.47 million only funds inspections, cleaning existing structures, and replacement of 0.25 miles of existing pipe per year. At that rate, it would take over 60 years just to replace today's pipes that are rated most severe and likely to fail, and over that time period, we would see additional pipes rated in intermediate disrepair move to extreme disrepair, on the cusp of failure, as well as likely see numerous pipe failures, requiring us to spend millions to fund emergency repairs over that time. Essentially, we would never get ahead and would only far further behind in our repairs and pay millions more than budgeted if we don't invest significantly more towards replacement of the entire stormwater system.
- Shawnee maintains 179 miles of pipe, nearly 10,000 inlets and junction boxes, 100 miles of roadside ditches, and 13 miles of improved channels.
- 57% of our stormwater pipes have already exceeded their maximum life expectancy.
- Regular inspections show 31% (57 miles) of existing underground pipe need to be replaced or repaired at an estimated cost of $114 million over the next 20 years.
- 8.5% of our pipes are currently rated to be in extreme disrepair and need to be replaced as soon as possible. Pipe collapses and other failures can occur at any moment at these locations.
- 23% of our pipes are rated to be as deteriorating condition - intermediate disrepair.
But wait, you might ask, what about the 1/8 cent Parks & Pipes sales tax that voters approved in November 2014? Doesn't that fund pipe improvements and enable us to speed up repairs?
The renewal of that 1/8 cent tax allows the city to invest more in stormwater needs, and it complements the existing stormwater utility fee, but over the last 10 years, revenue from that tax has only accounted for $6.1 million, all of which has funded 19 stormwater projects across the city. That revenue doesn't begin to address the $114 million needed to replace the 31% of pipes rated in most severe or immediate disrepair, let alone the nearly additional 29% of pipes that are beyond their life expectancy and currently deteriorating quickly.
And those estimates do not even begin to address the additional stormwater issues brought to the city's attention by local residents. In the beginning of 2016, 42 work orders related to stormwater originated solely from Citizen Service Requests (CSRs) online. As of June 23rd of this year, there is a backlog of 133 citizen service requests related to stormwater.
Here is a map of the existing, open stormwater work orders related to citizen service requests. Click the thumbnail below to view an enlarged PDF of the image.
Increasing Fire Response Times
Shawnee is one of the fastest growing cities in Johnson County, and growth in the western and northwestern portions of the city continues to explode with significant new home construction. Growth has coincided with a heavy increase in service calls, and response times to northwest Shawnee far exceed the National Fire Protection Association's 4 minute benchmark. Fire response times in much of northwestern and northeastern Shawnee is greater than 6 minutes and in some cases, over 11 minutes, which is completely unacceptable in life and death situations.
Northwest Shawnee is not served by a fire station, and our city is only served by 3 fire stations overall.
Costs for a new fire station to address the exploding population growth in the northwest quadrant would total $3.625 million, which includes construction, equipment (3 captains and 9 fire fighters). Staffing costs would total an additional $1 million annually.
- Lenexa has 5 fire stations despite have 20% less land area than Shawnee
- Leawood has 3 fire stations even though it is roughly only a third the size of Shawnee in land area.
Expanding the Police Force
The Shawnee Police Department remains understaffed for a city of our size (7th largest in the state of Kansas, 3rd largest in Johnson County, with an estimated population over 65,000), with just 88 police officers. According to the Department of Justice's Bureau of Justice Statistics, the national average is 1.8 police officers per 1,000 residents. In Shawnee, we fall below that with only 1.35 officers per 1,000 residents. Here's how we compare to some of our neighbors:
We hired a community resource officer last year to assist local neighborhoods with crime prevention and neighborhood watch efforts, but we are still short and over the past two years alone, we've had 6 officers leave for other agencies, due to the competitive environment with so many municipal entities and police departments in Johnson County.
- Mission: 3.05 officers per capita
- Merriam: 2.68 officers per capita
- Leawood: 1.88 officers per capita
- Lenexa: 1.69 officers per capita
- Shawnee: 1.35 officers per capita
- Overland Park: 1.34 officers per capita
- Olathe: 1.30 officers per capita
Blackout minutes (the times when all on-duty officers are engaged in calls and there are no officers to respond to new emergencies) increased by 15% this past year. These numbers are staggering and frightening, as life and death situations could be at stake.
Blackout Minutes so far in 2016
We need to hire at least one additional officer, and we could really use 4-5 more police officers.
I don't view these as immediately necessary as the needs above, but they are needs and as such, outlined below:
- Stormwater technician
- Dedicated street inspector for the street maintenance program
- Engineering Tech position to oversee the Nieman Road Corridor redevelopment project
A Fiscally Conservative City
By every measure, we are among the most fiscally conservative cities in the county and far more fiscally conservative and efficient than similar cities in population nationally. That strong commitment to efficiency and low costs has enabled us to weather recession and economic downturn, but it also means that we are spread so thin, that there is no fluff, no room to invest in critical infrastructure needs. At our June 21st council committeee meeting, Councilmember Jenkins suggested we review costs for supplies, department certifications, and travel budgets to "trim the fat" so that we could fund stormwater, fire, and police needs. Department certifications are crucial to ensuring our staff is trained in the latest techniques and keeping up with the trends for servicing our residents - certification reduces performance errors and inefficiences, driving down costs. Travel and supplies are minimal - we're talking tens of thousands of dollars at most. Stormwater, police, and fire needs are in the millions of dollars.While it's always helpful to review and examine expenses to find efficiencies and cut down costs, attempting to cut these items would not have allowed us to fund any of our existing needs and cutting 10% of our existing budget, as proposed by Councilmember Jenkins, would still fall far short of the $114 million needed for stormwater repairs alone, and the 10% across-the-board cut would have impacted current operations and core city services. In short, there is no room to cut 10% of our total budget without negatively impacting roads, stormwater, and public safety - those very same core services we are attempting to fund more heavily and at a more rapid pace. Councilmember Jenkin's proposals - which came at the 11th hour of our budget process and would not provide us the revenue to fund these critical needs - were voted down 5-2 (Councilmembers Neighbor, Meyer, Vaught, Sandifer, and I voted NO; Councilmembers Jenkins, and Kemmling voted YES, Councilmember Pflumm was absent).
Just how conservative is Shawnee?
We have the 5th lowest mill levy in Johnson County - lower than 80% of all cities:
We rank 7th in the top 10 most populous cities in the state of Kansas, and among those largest cities, we have the second lowest mill levy rate. If a mill levy increase of 2.44 mills does pass, we would have the 4th lowest mill levy of the top 10 cities, and we would still fall below the average mill levy rate of 31.577 for the state's top 10 largest cities.
We have the second lowest expenditures per capita, compared to our neighbors - great for efficiency purposes, but problematic as far as delivering on core services for our residents:
We have the lowest number of employees per capita of any of our neighbors in Johnson County, proving that we do far more with far less:
Options & Solutions
The Governing Body is considering an increase in our mill levy and stormwater fees to meet some of these demands.
Raising the mill levy (property tax) is not something I take lightly. I'm proud of the fact that our mill levy is one of the lowest in Johnson County (at 24.536 mills), we are 5th lowest out of 20 municipalities - lower than 80% of the rest of the cities around us. We haven't raised our mill levy in over 10 years (since 2006), but since that time, we've faced increasing infrastructure costs, major growth out in western Shawnee, and a backlog of citizen service requests related to road repair and stormwater management.
The City Manager has recommended that we raise our mill levy by 6 mills to cover many of the unfunded projects and needs. I and others on the council thought this increase was too high and too burdensome on our taxpayers, although I do not dispute the needs and the value of all the projects that are currently underfunded and delayed. I'm sensitive to the fact that our residents have been confronted with major tax increases in the last few years, including the largest tax increase in Kansas history when legislators in Topeka raised the sales tax, and last year's substantial increase in the mill levy by county government.
There's no question we need to confront many of these critical infrastructure and public safety needs, but we need to do so responsibly. Inaction is not an option, especially after the imposition of the property tax lid last session by state lawmakers, which prevents us from capturing future growth in property values to fund infrastructure and public works needs. Ironically, actions by legislators in Topeka are forcing us to consider a property tax increase just to fund essential services and maintain existing public safety and public works services.
Prior to our June 21st council committee meeting, we individually contemplated and allocated additional mills for many of these projects and prioritized the needs. At council committee, we took a vote on doubling our stormwater utility fee to help fund critical repairs to our stormwater pipes. Our stormwater fee is currently $3/month and is one of the lowest in Johnson County. It has never been increased since its inception. The vote to increase the stormwater fee was 4-3 FOR (Councilmembers Neighbor, Vaught, Sandifer, and I voted YES; Councilmembers Kemmling, Jenkins, and Meyer voted NO. Council member Pflumm was absent).
I voted YES because the stormwater system is our most immediate need that must be addressed. It is fiscally irresponsible not to get ahead of these repairs, and it would be the height of extreme negligence for us to wait for these failures to occur and then bill taxpayers for our failure to take action and be proactive. Moreover, I'm more supportive of increasing the stormwater fee as a basis to fund stormwater improvements since this fee has a direct correlation to what it funds: all revenues from the fee go back into stormwater. Also, all property owners pay this fee, not just residents and businesses, so everyone shares in the responsibility of funding these essential repairs. The doubling of the stormwater fee is equivalent to 2 mills or $1.64 million dollars per year. It's a start in funding the $114 million in necessary repairs.
We also held two separate votes on recommending mill increases to be added to the 2017 budget for a new fire station (1.77 mills) and the hiring of 5 new police officers (0.49 mills). The recommendation for 1.77 mills for the fire station passed 4-3 (Neighbor, Vaught, Sandifer, and Meyer voted FOR; Jenkins, Kemmling, and I voted AGAINST. Councilmember Pflumm was absent). The mill increase for additional police hires FAILED 4-3 (Jenkins, Kemmling, Meyer, and I voted AGAINST; Neighbor, Sandifer, and Vaught voted FOR). So essentially, the recommendation was to forward a 1.77 mill increase to be included in the 2017 budget along with a doubling of the stormwater utility fee.
I have been very reluctant to support a mill levy increase, as I firmly believe that if we are to consider one at all, we need to have a broader conversation on how many mills we are willing to support, how far we are willing to go, and what essential priorities we would fund with this type of increase - which is really a one-time increase for me as I would not support raising the mill levy again for many years. As we voted on small mill increases need by need, project by project, I felt uncomfortable with voting priority by priority with no indication of consensus on the most immediate needs and no indication of where the votes would fall or when we would discontinue voting on piecemeal mill increases. Also, I believe that the fire station and police officers should have been combined as a single public safety need tied to a single mill levy increase - I think both are priorities and pitting police against fire as competing mill priorities didn't sit well with me. Because it was unclear where we would stop (2.5 mills? 3 mills? 4 mills?) and what we would fund by the time we were done, I voted against both mill levy increases. We need to have an honest, open conversation about all that we are willing to fund and then increase the mill levy to fund those needs, but only fund those immediate needs - no more, no less.
At our council meeting last week, Councilmember Vaught proposed re-opening the discussion to consider additional revenue for stormwater, police, and infrastructure needs. I agreed and spoke in favor of starting the conversation anew and setting an upper limit for a mill levy increase that we could then work backwards from, prioritizing all needs that could and should be included in such an increase. Councilmember Neighbor then proposed setting an upper limit of 2.44 mills (less than half of the 6 mills originally proposed by the city manager) for discussion at our public hearing next Monday before we approve the budget. This motion sets the maximum rate at which the mill levy can be increased, and at our public hearing we have complete discretion to determine whether to reduce it further or increase the mill levy at all, but it gives us a benchmark for starting the conversation, and it allows us to outline other priorities to consider if we proceed with an increase, so we're not operating with no limits or no basis for shared consensus on priorities.
The vote to set a maximum threshold of 2.44 mills to be discussed and debated at the public hearing as we consider additional priorities such as a street inspector and an additional police officer passed 6-2 (Councilmembers Neighbor, Pflumm, Meyer, Vaught, Sandifer, and I voted FOR; Councilmembers Kemmling and Jenkins voted against).
This is a difficult conversation to have, but it should be difficult and messy, especially if everyone is reluctant as I am to take this step, but it is a conversation that must occur, and it would be more irresponsible to compromise public safety by not maintaining adequate police and fire response times, and fiscally wasteful to allow pipes to fail and then be faced with paying exorbitantly for repairs. Moody's, the national agency responsible for rating our bond and credit worthiness, has given us an Aa1 rating, which saves the city and taxpayers hundreds of thousands of dollars due to the very low interest rates we receive when borrowing and debt-financing projects. Moody's frequently assesses a governing body's willingness to increase revenues when needed to fund core services, and that factors into our bond and credit ratings, so our reluctance over time to increase revenues to fund core services could have a long-term impact on our bond and credit ratings, costing the city - and by default, taxpayers - more over time in higher interest rates.
Most importantly, our vote last week to set the upper limit at 2.44 mills and include additional public safety and infrastructure priorities allows members of the public to weigh in with their feedback, something I highlighted specifically at our council meeting (you can read my quote in the recent article about the mill levy increase here in the Shawnee Dispatch). All of our most critical needs must be on the table for consideration and the public should be given the opportunity to provide feedback. By not setting the mill levy threshold higher and including other critical needs outside of the fire station, we would have deprived the public of the opportunity to give us their opinions and include those in the decision-making process, since we would have effectively shut down the discussion with no ability to add in additional needs voiced by the public next Monday. A decision of this consequence should not be made in a vacuum without public input.
If a 2.44 mill increase passes, the average household in Shawnee would face $5.58 per month in additional property taxes (approximately) and an additional $3.00/month in stormwater utility fees, which are paid by all businesses, churches, non-profits, and schools as well. That would bring Shawnee's total mill levy up to 26.97, moving us from 5th lowest in the county to 8th lowest, and still lower than 60% of all other cities in Johnson County.
Your total mill levy (property tax) includes dedicated mills for multiple taxing authorities, including the state, county, your local school district (either Shawnee Mission 512 or DeSoto 232 in Shawnee), the Johnson County Library, and Johnson County Community College:
|By Taxing Entity
|City of Shawnee
|State of Kansas
|JoCo Parks & Rec
|JoCo Community College
As a reminder, any increases over the last ten years did NOT originate from the city but from your school district or from the county, which increased their portion of the mill levy by 3.30 mills in 2015. We have been operating at 2006 levels, despite the 48% increase in the local consumer price index, higher infrastructure costs, and continued growth out west.
Thoughts, questions, feedback? Let me know and attend our public hearing at next Monday's city council meeting, July 25th at 7:30 pm at City Hall. We need to hear from you on these priorities and whether you expect these services to be funded and completed in a timely manner. It cannot be understated that those who show up and provide input have a direct and profound effect on the direction of our debate and how we vote.