The Hillsboro City Council spent a good portion of its Sept. 5 meeting discussing the parameters of a debt-management policy for the city.
City Administrator Larry Paine said the discussion would be timely, given the probability of separate bond issues for upcoming street projects and water-line projects.
Councilor Brent Driggers had surfaced the debt issue several meetings earlier when the council was reviewing the 2016 audit.
“The presence of such a policy is one of the items our bond agency looks at when reviewing our financial condition,” Paine said.
He added that his initial research indicated many small communities do not have a debt-management policy.
“Traditionally, when smaller communities went to the bond market, the size of the issue did not make sense to get a bond rating,” Paine said.
“This changed after the financial recession of 2008, when Congress started criticizing these firms for not doing their due diligence rating some of the larger firms and units of government.”
Paine distributed a summary of debt-management policies he collected from four larger cities: Leavenworth, Pittsburg, Topeka and Emporia.
“The single biggest difference on these documents is the wide variety of metrics, and variety of what the metric values should be when a metric was common to different versions.”
Paine said his goal for the discussion would be to receive feedback from council members regarding the “metrics,” or policy criteria, that would be meaningful for Hillsboro’s situation.”
Part of the challenge, he admitted, was simply understanding the definitions of the various kinds of debt taken on by local government entities.
For example, Paine said bonds for the upcoming street projects are mill-levy related, while bonds for the water-line project will be paid with water-use fees.
Paine assigned “homework” for the council members to review the metrics comparisons he provided and respond to him with one-on-one input.
Paine reviewed a final draft of the priority street projects on the horizon with an estimated cost of nearly $4.56 million—but $4.2 million would be funded with bonds, and the remaining three projects with the help of a Community Development Block Grant. (See box.)
Paine highlighted a possible change of plan for the city’s approach on West Grand Avenue, from Ash Street to Hickory Street. The city engineer had suggested removing and replacing the concrete, but Paine said Street Superintendent Dale Dalke suggested edge-milling the existing concrete and then overlay the asphalt.
Paine said Dalke’s approach would significantly reduce the original cost by nearly $1.5 million.
Councilor Bob Watson questioned Paine regarding the East Grand project, from Washington to Adams, which indicated old brick would be replaced with new brick. Watson said he recollected the council was leaning toward a less expensive approach.
Paine said he used the more expensive estimate to ensure adequate funding if new brick was chosen, but the council can still choose a less expensive option prior to the bidding process.
Paine said the water department is still looking into reducing the financial allocation for automatic meter reading equipment—currently $1.37 million in a potential project totaling just over $4.7 million.
He said department personnel are gathering data “on how many meters need to be replaced and with the various setters, meter cans and lids.”
As for funding, Paine said the council has considered USDA Rural Development financing.
“USDA still does not have a budget, so we cannot plan on when they can fund our project,” Paine said.
He said the Kansas Department of Health and Environment’s Revolving Loan Fund is a viable alternative because it “has the money and is able to fund projects.” Also, KDHE has a lower interest rate and the lifecycle cost of insurance is much less than USDA financing.
Paine said, “Whoever has the money when we want to start, that’s the direction we will go.”
The council followed up the discussion during its Aug. 22 special meeting about Policy 41, which identifies which city staff are eligible for the city’s Christmas party.
The council voted 3-0 to add Steve Fast, museums coordinator, to the list of eligible part-time employees to be invited.