Wichita council debates future projects, debt, selling Hyatt
08/23/2013 4:55 PM
08/05/2014 8:21 PM
Wichita City Council members clearly aren’t happy with the first draft of the city’s 10-year, $2.4 billion capital improvements plan, an aggressive project list that would drive the city’s debt load to 91 percent of its capacity in 2019, up from 55 percent this year.
But not unhappy enough to sell the Hyatt Regency Wichita in an effort to avoid a proposed one-year delay of the downtown library project.
The capital improvements plan focuses on high-profile projects like the new Mid-Continent Airport terminal, a new downtown library and the east Kellogg extension, which would be financed by a combination of sales-tax-backed general obligation bonds and state and federal funding, city staff said at a council workshop Tuesday.
The plan, said city finance staffer Mark Manning, would drive up the city’s general obligation debt load to 91 percent of its capacity in 2019, or well above the 67 percent average carried by cities with AAA credit. Wichita’s credit is AA, Manning said. The plan would drive the city’s general obligation debt service bill to almost $40 million, City Manager Robert Layton said after the workshop.
That clearly didn’t please council members, or Layton, who immediately proceeded into alternatives to slow debt growth. And that’s where the fate of the city-owned Hyatt came into play.
When council members began discussing a one-year delay in the $30 million downtown library project, from 2013-14 to 2014-15, Michael O’Donnell objected, launching a discussion that revealed the Hyatt’s market value has declined by almost two-thirds in a down economy.
“Some of these projects are very important to the community,” O’Donnell said. “It’s more valuable to do the library than own the hotel. We as a council need to make those policy decisions when we have assets like that and need to make new assets. Instead of increasing debt, we should liquidate some of them.”
O’Donnell’s colleagues didn’t object to reviewing the Hyatt’s future – later.
“I agree we should look at the opportunity to divest ourselves, but I’m not interested in getting rid of the hotel at today’s terms in what would be a fire sale,” council member Jeff Longwell said.
Mayor Carl Brewer said selling now would have the potential to cost the city more than $30 million.
“I recognize that now is not the right time to sell a hotel,” Brewer said. “In previous years, the value of the hotel to buyers has been between $30 and $40 million. We talked many years ago about $50 million. Today, we’re talking $17 million.”
After the meeting, Brewer said he’s comfortable holding onto the Hyatt for now, saying the hotel generates between $700,000 and $2 million in annual profit that is plowed back into hotel improvements. The mayor said he thinks the library project isn’t fully funded, with city estimates about $15 million short of proposals from library officials.
“I still believe we need a new library,” Brewer said. “But … the amount we have allocated is about $30 million, and what the library board and the citizens have told us they need is about $45 million.
“I’m still committed, just as I was before, but I think in that year we can better figure out how we can get the best bang for our buck.”
Layton and staff presented three alternative capital project scenarios in light of the debt questions.
The scenario that got the most attention from council members and Layton mixed significant delays in a handful of road projects across the city with a one-year delay in the library project, delayed relocation of Patrol East and Patrol West substations, and a delay in a maintenance facility project. Those plans would moderate the growth in the city’s general obligation debt service capacity significantly, topping out at 82 percent in 2017. Dollar estimates weren’t immediately available.
“It significantly reduces the amount of debt we’d have through the entire planning process,” Layton said. “It gives us more capacity as we look toward the future.”
The proposal that drew council criticism on Tuesday included 375 projects totaling $2.4 billion, Manning said. About 40 percent of the proposal falls in water and sewer projects, totaling around $900 million.
General obligation bonds will fund $313 million of the proposed $2.4 billion package, with local sales taxes covering an additional $237 million, Manning said. A half-cent from the sales tax is used for capital improvement plan projects.
Water and sewer revenues pick up another $872 million of the tab, with federal and state grants totaling $399 million. The remainder — $588 million — largely comes from airport revenue and fees, and special assessments, Manning said.
The high-profile projects on the list include the $200 million airport terminal; the $13.7 million Heartland Preparedness Center at I-135 and K-96, a joint effort with the Kansas Air National Guard that includes a $13 million joint city/county building; the new $30 million Central Library on the southwest corner of Second and McLean; the $180 million east Kellogg extension that includes about $66 million in local sales tax funding; and the 13th Street Flyover, a $50 million project funded by local sales taxes.
Also included is funding to enhance the city’s street maintenance program – $8 million in 2012, $9 million in 2013 and at least $10 million in 2014.
City staff wants to take a firm draft capital improvement proposal to district advisory boards and the Metropolitan Area Planning Commission next month, with City Council approval after that input.