CHICAGO — With Kansas City, Mo., set to exhaust its voter-approved general obligation bonding authority with an issue next month, Mayor Sly James is hoping to win City Council and voter support for as much as $1 billion of new authority for infrastructure improvements over the next decade.
James floated the proposal in a speech late last week. James believes $1 billion in new spending — raised through $100 million in annual borrowing — is needed to undertake citywide roadway, bridge, sidewalk, and other improvements and maintenance. “I feel strongly that we need to start doing something about our infrastructure problem or stop complaining about it,” James said.
The proposal was floated in the mayor’s annual response to the budget proposal submitted by city manager Troy Schulte. The budget included a proposal to seek voter approval for $100 million in new authority for the coming fiscal year that begins May 1. The budget is the subject of ongoing public hearings and will be voted on March 22, said Kansas City finance director Randall Landes.
“The mayor wants the work to be impactful and would like to have ongoing authority to complement our annual pay-as-you-go financing of infrastructure,” Landes said. “With rates being what they are, it’s an attractive time to have bonding capacity.” A measure, if approved by the council, could go before voters as soon as August.
The proposed budget holds spending levels steady with no tax increases and cuts $7.5 million from the fire department. Sales tax collections have been on the rise but other taxes such as the earnings tax are below current expectations, forcing the city to tighten spending in the current budget, Landes said.
Two bond sales are scheduled for next month, said Treasurer Tammy Queen. A $220 million GO issue is slated for March 8. It includes $93 million of refunding bonds that are expected to achieve at least 7 % in present-value savings.
The new-money piece includes $25 million for infrastructure and another $100 million for public safety, including new police stations and crime laboratory, helicopter purchases, and renovations to the police headquarters.
The borrowing will tap what remains of $300 million of GO infrastructure borrowing approved by voters in 2004 and use all of the $100 million approved for public safety approved in 2010.
Citi is the senior manager. First Southwest Co. and Moody Reid Inc. serving are financial advisors. Gilmore & Bell PC and Martinez, Madrigal & Machicao LLC are bond counsel.
The city will sell $65 million of special obligation, appropriation-backed new-money and refunding bonds on March 15. The deal includes $18 million of tax-exempt bonds to fund a new revenue system that will replace an aging system.
The deal includes $47 million of taxable bonds including $15 million to reimburse the city for the costs of a settlement reached late last year with the developers of the troubled Citadel Plaza project. The developers sued Kansas City in 2010 for breach of contract after the city opted not to provide a pledged subsidy. Another $4 million would fund site development.
Another $4 million would pay off short-term debt issued for another project. The remaining taxable piece would refund taxable parking garage debt and convert some parking garage debt to taxable from tax-exempt to give the city more flexibility its leasing options, Queen said.
Though still in the early stages, the city could issue appropriation-backed debt as soon as this year to help fund a $100 million street car project. The Downtown Council is seeking to establish a transportation development district in the area, which the cars would serve. Financing plans are still preliminary, as it is uncertain how much federal aid the project might receive. The city estimates its share for the project would be between $50 million and $100 million.
City officials will meet this week with rating agencies to update them on the proposed budget and borrowing plans. Fitch Ratings assigns a AA to Kansas City’s GOs, Moody’s Investors Service rates them Aa2, and Standard & Poor’s rates them AA. All assign stable outlooks.