A measure adopted by the Kansas Legislature last week will allow Junction City to operate with debt levels higher than mandated under state law through 2020.
Junction City can keep its debt level at 37% of property valuation through 2016, then reduce it to no more than 34% until 2020.
Without the exemption, Junction City would have to lower its debt to no more than 34% of total assessed property valuations in 2013 and 30% in 2016.
Junction City’s general obligation debt is rated A-minus with a stable outlook by Standard & Poor’s. The city of 23,350 is 60 miles west of Topeka.
City officials said Junction City would be limited to borrowing no more than $50,000 through 2016 at the current state-imposed ceiling for debt.
Kansas allowed Junction City to raise its debt ceiling to 40% of valuations in 2008.
The move enabled the city to issue $133 million of general obligation bonds to boost commercial and residential development to accommodate expansion of nearby Fort Riley.
The city hoped to attract some of the 8,000 troops moved to Fort Riley from Germany to off-base housing, but the anticipated growth never occurred.
The city paved streets and installed utility lines to several subdivisions that are now mostly vacant.
Former Mayor Michael Wonder went to federal prison for 24 months for accepting bribes in the awarding of city development contracts.
City manager Gerry Vernon said Junction City has reduced its payroll and increased fees and taxes to meet debt service on the bonds.
Mistakes were made by the previous administration, Vernon said, but the city now has a recovery plan.
In August 2010, voters approved a 10-year, 1% sales tax that is dedicated to debt service on the 2008 bonds.
The tax generates about $3.5 million a year.