County debt debate resurfaces with 2017 budget

Sedgwick County commissioners are divided over how the county should pay for roads, bridges and other capital projects like building upgrades.

Should the county borrow or should it use money it has in reserve for emergencies?

The debate was a flashpoint during a contentious budget process last summer. Commissioners are revisiting the issue as they weigh the county’s recommended budget ahead of its Aug. 10 adoption.

In the past, the county borrowed to pay for some road and bridge projects. It traditionally has used debt “sparingly” by issuing bonds, said county chief financial officer Chris Chronis.

But the budget approved last August by a new commission majority represented a shift to paying for future capital projects solely with cash.

Some commissioners say this will reduce the county’s overall debt and save taxpayers money in the long run. But other commissioners say it gives the county fewer choices and spends money the county should save for a rainy day.

Sedgwick County would spend about $7.7 million from its cash reserves on projects in the 2017 recommended budget. That money would help pay for roads and bridges, the Law Enforcement Training Center, new EMS posts and drainage work.

The county would still have about $66.9 million in its reserves at the end of next year.

“We have built up sizable reserves over the years as a tactic to help us get through periods like the Great Recession,” Chronis said. “Over the short term, it will mean that we have fewer reserves. … But that’s not very much of a problem.”

“Over a long period of time, it conceivably means that we either draw down our reserves to a dangerously low level or that we start deferring necessary projects because we don’t have the cash to pay for them,” Chronis said. “We’re not to that point now. I don’t think we will be to that point for at least several years.”

The county is expected to take in $243 million but spend about $248 million in funds supported by property taxes. That’s a projected deficit of $4.5 million for next year. Chronis said the county expects the deficits to become surpluses in several years as the economy grows.

‘We had dug ourselves in the hole’

Commissioner Richard Ranzau, who was the commission chair during last summer’s budget discussions, said he has been concerned for years that the county was wasting money by borrowing and paying interest to finance road and bridge maintenance.

“The whole time when I was in the minority for four years, I looked at things, I examined things and I said ‘that doesn’t make sense,’” Ranzau said. “I started developing plans to do it differently.”

“This is a clear example where we had dug ourselves in the hole,” he said. “And it gets worse because we were taking money out of our road and bridge (funds) to help pay for that … interest.”

Ranzau said the county was “abusing” debt and not using it in a reasonable way. He says it makes sense to pay for projects from reserves if the cash is there.

“We’re not going to keep doing this until we have ‘zero’ in our reserves,” Ranzau said.

Current chairman Jim Howell said borrowing should be considered for large projects but that the county shouldn’t borrow for projects that are “routine or small in nature.”

“As we’re transitioning to using more of a cash-based system, we use these reserves to help us,” Howell said. “Eventually down the road, you can imagine us being a debt-free county. If we were ever able to attain that goal, we would actually have a lot more money available.”

Commissioner Karl Peterjohn has also supported the transition as a way to reduce the county’s debt. His two opponents, Republican primary challenger David Dennis and independent candidate Marcey Gregory, have said they’re more open to borrowing for road and bridge projects.

‘Legitimate business strategy’

Commissioner Tim Norton says the county has backed itself into a corner by taking borrowing off the table.

“I don’t look in my toolbox and go ‘Gee, I don’t like the Phillips head screwdriver so I’m going to throw it away completely,’” Norton said. “To not have that in our toolbox just does not make sense.”

“I’m just afraid we could have a big project that we want to do, an initiative that’s important for our community,” he said. “Some kind of a disaster, a tornado or something, that would really tap our cash that we were saving.”

Commissioner Dave Unruh favors using some borrowing for capital projects, but says the commission majority has well established its desire not to do that this year.

“I don’t know that there’s need for us to get in hand-to-hand combat over it,” Unruh said. “I think it’s still a legitimate business strategy to do that.”

Unruh said he thinks spending less from the cash reserves would allow the county to reinstate some 2016 cuts to the county health department or consider reducing the property tax rate.

“We not only spread the costs over the generations that will benefit from that investment, but we also relieve pressure on our budget,” Unruh said.

This story was originally published July 25, 2016 at 6:12 PM with the headline "County debt debate resurfaces with 2017 budget."