Nebraska county gains approval to build bond financed juvenile center

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Omaha-Douglas County Public Building Commission is moving ahead with plans to build a bond financed juvenile detention center and a courthouse annex at the cost of additional taxes and a rating downgrade by Moody’s Investors Service.

Moody’s lowered its rating two levels to Aa3 on the $114 million of bonds, which are scheduled to price in early July. The outlook is stable. The downgrade also affects $157 million in debt secured by a pledge of a limited property tax levy.

Moody's said the limited tax levy will be insufficient to cover debt service following the newest series of debt, triggering a need for additional rental payments from the county and city to cover the shortfall.

As of fiscal 2019, the commission has levied a county-wide 1.7 cents per $100 of valuation property tax, the maximum amount it can levy by law. Fiscal 2020 will be the first full year the maximum tax is collected. It is expected to generate $1.4 million to$1.7 million in additional revenue, bringing the total in limited property tax revenue to $7.5 million.

“The Aa3 rating reflects the Commission's limited tax pledge which, with the issuance of additional debt, is now significantly short of the amount necessary to cover all debt service payments,” Moody’s said. “Since Omaha and Douglas County agree to provide sufficient funds for their share of the debt, the credit ratings of each entity is paramount. The one notch rating differential from the city's general obligation unlimited tax debt rating reflects the slightly weaker security, relative to a GOULT debt pledge.”

Moody’s rates Omaha and Douglas County Aa2 and Aaa, respectively.

The rating company said that although the commission’s debt burden had increased to a level that requires support from the city and county, its operations are sound with a solid financial position thanks to consistent revenue streams associated with its levy authority and its ability to adjust rental rates paid by Omaha and Douglas County.

The new bonds will fund a courthouse annex and a new juvenile detention center in downtown Omaha.

Included in the proposal is a 64-bed juvenile detention center that is planned to be connected to the courthouse. This would replace Douglas County's current juvenile detention center with 96 beds.

Douglas County property taxpayers would pay the debt through rent the county would pay to the Building Commission.

The county has estimated that building the courthouse annex and juvenile justice center will require another 1.5 cents per $100 in assessed property value.

Proponents of the project have said building a new, smaller, less jail-like detention center next to an expanded juvenile court and adjacent to services for youths and families would streamline juvenile justice and spark further reforms.

Members of the Douglas County Board have pushed for the $114 million project for nearly a year. The plan has drawn criticism from those who believe the detention center won't be large enough and doesn't belong downtown.

The plan which was passed in a 4 to 2 vote by city council last week could have been vetoed by Omaha Mayor Jean Stothert.

Stothert, who will not veto the measure but won’t sign it either, said in a statement that she is concerned that too few beds will be available in the new detention facility to address future needs, including city growth.

“While this is a Douglas County project, the impact of bond funding for the project will result in a property tax rate increase by the Douglas County Commission on county residents, which I do not support,” Stothert said. “It is also for this reason that I will return the ordinance unsigned.”

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Revenue bonds Infrastructure bonds: detention centers Nebraska