This morning we'd like to offer another EPIC FINANCIAL OPUS FROM A KICK-ASS KANSAS CITY INSIDER and one of the rare denizens of the metropolitan area who understands the CONSEQUENCES OF KANSAS CITY GO BOND BORROWING AND RISING TAXES on grand scale.
This is in-depth coverage and financial analysis but let's break it down to start off the torrent of valuable public information . . .
BANKRUPTCY AND NEGATIVE CREDIT RATINGS THREATEN KANSAS CITY THANKS TO THE CURRENT TAX AND SPEND LEADERSHIP AT CITY HALL!!!
Whilst financial deets can be cumbersome, this blog post thanks to an AWESOME DENIZEN OF OUR BLOG COMMUNITY makes the situation plain and offers a terrifying context as this cowtown starts a path toward the economic abyss.
Like it or not, the consequences of this looming disaster impact every resident of the metro as much as any other public safety threat or political outrage.
Checkit:
Kansas City Insider: A GO bond, wrapped in a sales tax, encased in an annual budget
On November 1, 2015, KCMO City Manager Troy Schulte presented the Mayor and Council with the Adopted 2016-2021 Citywide Business Plan. On page 10 of 76, under the heading Finance and Governance, goal item number 11 states: "Develop a comprehensive funding strategy for maintenance and capital improvements in conjunction with the renewal of the Capital Improvement Sales Tax in 2018 and a $500 million General Obligation Bond authorization in 2016."
On November 1, 2016, KCMO City Manager Troy Schulte presented the Mayor and Council with the Adopted 2017-2022 Citywide Business Plan. The City Charter requires that the annual plan be adopted by November 1 of each year. On page 7 of the original document (PDF page 10), under the heading Council Goals, Departmental Strategic Objectives, Finance and Governance, goal item number 7 states: "Develop a comprehensive funding strategy for maintenance and capital improvements in conjunction with the renewal of the Capital Improvement Sales Tax and an up to $800 million General Obligation Bond authorization in April 2017."
So, of course, we're noticing two glaring items which are begging for attention. Let's take a look, shall we?
1) KCMO residents, whether they realize it or not, are already paying an additional sales tax for Capital Improvements. That's right folks! City leaders are gearing up to ask residents to tax themselves AGAIN for something that already has an existing dedicated sales tax. Can you say DOUBLE TROUBLE?
Let's dig into the archives and retrieve some news headlines from past years on this subject.
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"A 2007 ballot effort that passed overwhelmingly . . . Kansas City Question #1 requires that 35 percent of revenues be dedicated to neighborhood improvement projects, a 10 percent increase from the previous tax. It also mandates that 15 percent of the tax revenues go to deferred infrastructure maintenance.
"The City's capital improvements program is guided by the Public Improvements Advisory Committee, a 13-member volunteer oversight group that receives, analyzes and prioritizes residents' requests for improvements. City neighborhood groups and residents have requested 3,720 improvements through the committee in the past five years . . ."
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Hmm....that seems strange, doesn't it? Besides the customary taxes that are levied on residents (and non-residents; earnings tax,sales tax) for the KCMO annual budget, they also pay an additional sales tax specifically for Capital Improvements. And now, the city is proposing to borrow yet another $800 million dollars for capital improvements in the form of general obligation (GO) bonds. Ok, let's add this up and keep it straight. There's money allocated in the annual budget for KCMO capital improvements; residents already pay an additional 1-percent sales tax for capital improvements and the city is planning to ask you to renew that tax on yourself again; city leaders are now gearing up to push residents into approving an additional $800 million dollar bond issuance for capital improvements. That's a lot of capital improvements! A taxpayer would be excused for asking out loud, "Where's all the money gone?"
2) Sometime in the 2016 calendar year, according to the available KCMO Citywide Business Plan documents, a planned General Obligation Bond authorization was increased from $500 million to $800 million dollars. That's a 60 percent increase from the original figure. Hmm....that seems strange, doesn't it? Can anyone explain the history on this sudden desire to take KCMO deeper into debt? Who decided to ask for $300 million additional dollars beyond the original planned ask? And, how is that even possible, given that City Hall hasn't released a definitive listing of prioritized projects? Did the financial consultants report that $800 million was the absolute ceiling (credit limit) and city leadership decided to splurge, maxing out the municipal credit card?
Once more, let's dig into the news archives, and pull forth excerpts:
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"It’s believed to be the largest general obligation bond proposal in city history."
"The signature project to build support for the citywide bond package could be a new animal shelter at Swope Park ... City spokesman Chris Hernandez said, one slogan for this initiative could be “puppies and pavement.” Sounds like PUPPIES AND PAVEMENT PROPAGANDA.
"As initially conceived, the bonds would be issued in $40 million increments annually over 20 years and paid off with property tax proceeds. However, the tax increase would compound each year as more bonds are issued."
"James says he realized Kansas City had a massive deferred maintenance problem when he first took office in 2011."
"...the Fitch credit rating agency put the city on a “negative” watch. Kansas City already had a high debt load from guaranteeing several hundred million dollars in bonds for projects like the downtown Power & Light District, various hotels and parking garages, and other economic development ventures."
"The council may also ask next April to renew the city’s 1-cent sales tax for infrastructure, set to expire in 2018. That sales tax raises about $70 million per year.."
The council may ask? Don't be preposterous, they will absolutely ask for a renewal.
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Let me say for the record that I fully understand that managing a large city is a complicated task. I also understand that many of the surrounding communities in the metro have an excellent reputation for conservative fiscal management. It seems to me that one of the most important functions of city leadership is the ability to prioritize "needs" while deferring "wants", just as a parent provides shelter, food, clothing and education before considering things like toy trains, robot airports, and Barbie hotels.
Here's what's going on:
KCMO is in financial trouble. The dysfunction has been ongoing for years, and it's now getting harder to hide the shortfall. Residents are already stressed by a heavy tax burden, and now at a time of economic uncertainty, KCMO is gunning for the largest general obligation bond proposal in it's history. City Manager Troy Schulte has been with the city since 1998. If he can get this $800M stream of dollars flowing, it means he'll likely make it to retirement before the SHTF, and then somebody else is sitting in the hot-seat when it all blows up.
Keep in mind that the nation's economy never really recovered following the 2008-2009 Great Financial Crisis, but the Federal Reserve and Bush/Obama administrations took unprecedented drastic measures to prevent the system from being purged and reset. Our day of reckoning has not been avoided, only postponed.
Keep this in mind . . . The 5 Biggest Municipal Bankruptcies In U.S. History: Detroit, Michigan (2013)... Jefferson County, Alabama (2011) ... Orange County, California (1994) ... Stockton, California (2012) ...San Bernardino County, California (2012)
Of course it's not just Detroit and California's problem, as major U.S. cities, like Chicago and Dallas, are teetering on the knife's edge.
Huff Post: Chicago Slides Toward Bankruptcy
New York Times: Dallas Stares Down a Texas-Size Threat of Bankruptcy
Finally, if KCMO learned anything from it's long history with the troubled KCPS district, it should be this.....throwing more money at a problem, without changing the existing pattern of dysfunctional behavior, is a guaranteed path to ruin.
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Developing . . .
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