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Independence, MO —
The use of Independence utility funds to make payments on The Falls at Crackerneck Creek does not violate the City Charter, the city counselor says.
Following the legal opinion of City Counselor Dayla Bishop Schwartz, the Independence City Council Monday night approved the 2012-13 city budget, which includes $221,272 from utility funds toward the debt service payments at the development anchored by Bass Pro Shops.
On June 5, Council Member Eileen Weir had asked Schwartz for additional information on the matter and its legality before the council’s vote on the budget, which takes effect July 1.
The approved budget includes $4,571,206 from the general fund and $221,272 from utility funds for the debt service payments, which take place on Sept. 1 and March 1 of each year. The shortfall is taking place because the development – announced in 2004 – has not met revenue projections.
“It is my opinion that the decision to make improvements at The Falls at Crackerneck (Creek) to sell electricity and water and collect sanitary sewerage was a businesslike decision for the utilities,” Schwartz wrote, “not unlike the decision of a privately owned utility to build infrastructure in anticipation of development and the new revenue generated by the development.”
The budget passed 4-1, with District 2 Council Member Curt Dougherty opposed, and At-Large Council Member Lucy Young and District 3 Council Member Myron Paris absent. Before the vote, Weir said she agreed with Schwartz’s findings. At-Large Council Member Jim Schultz Monday night offered to make Schwartz’s legal memorandum public to anyone who asked him or another council member for it.
Weir had asked for clarification after hearing concerns from residents and because the City Charter states the electric utility and other public utilities must be operated separately from the general fund.
“I think (Schwartz) offered a fair and accurate explanation about how that is allowed under the charter,” Weir said. “… The money is not going to the general fund. It is going to the bond payments, so it will not be utilized within the general fund.”
The specific breakdown among the utilities includes $74,586, electric; $64,641, water; and $82,045, sanitary sewer. These amounts were based upon the share of reimbursable project costs that were bonded.
In Schwartz’s memorandum, she said $948,686 went toward electric system improvements; $1,053,291 was spent to relocate sanitary sewer lines; and $846,226 went toward relocating water lines.
“When the bonds were issued to fund these improvements, it was expected that the new tax revenue generated from these new businesses would pay the cost of the improvements and specifically that the new utility customers would generate the revenue to pay the cost of the utility improvements,” Schwartz wrote. “But until these new customers locate at the site, payment of the bonds that funded the improvements must still be made.”
The use of Independence utility funds to make payments on The Falls at Crackerneck Creek does not violate the City Charter, the city counselor says.
Following the legal opinion of City Counselor Dayla Bishop Schwartz, the Independence City Council Monday night approved the 2012-13 city budget, which includes $221,272 from utility funds toward the debt service payments at the development anchored by Bass Pro Shops.
On June 5, Council Member Eileen Weir had asked Schwartz for additional information on the matter and its legality before the council’s vote on the budget, which takes effect July 1.
The approved budget includes $4,571,206 from the general fund and $221,272 from utility funds for the debt service payments, which take place on Sept. 1 and March 1 of each year. The shortfall is taking place because the development – announced in 2004 – has not met revenue projections.
“It is my opinion that the decision to make improvements at The Falls at Crackerneck (Creek) to sell electricity and water and collect sanitary sewerage was a businesslike decision for the utilities,” Schwartz wrote, “not unlike the decision of a privately owned utility to build infrastructure in anticipation of development and the new revenue generated by the development.”
The budget passed 4-1, with District 2 Council Member Curt Dougherty opposed, and At-Large Council Member Lucy Young and District 3 Council Member Myron Paris absent. Before the vote, Weir said she agreed with Schwartz’s findings. At-Large Council Member Jim Schultz Monday night offered to make Schwartz’s legal memorandum public to anyone who asked him or another council member for it.
Weir had asked for clarification after hearing concerns from residents and because the City Charter states the electric utility and other public utilities must be operated separately from the general fund.
“I think (Schwartz) offered a fair and accurate explanation about how that is allowed under the charter,” Weir said. “… The money is not going to the general fund. It is going to the bond payments, so it will not be utilized within the general fund.”
The specific breakdown among the utilities includes $74,586, electric; $64,641, water; and $82,045, sanitary sewer. These amounts were based upon the share of reimbursable project costs that were bonded.
In Schwartz’s memorandum, she said $948,686 went toward electric system improvements; $1,053,291 was spent to relocate sanitary sewer lines; and $846,226 went toward relocating water lines.
“When the bonds were issued to fund these improvements, it was expected that the new tax revenue generated from these new businesses would pay the cost of the improvements and specifically that the new utility customers would generate the revenue to pay the cost of the utility improvements,” Schwartz wrote. “But until these new customers locate at the site, payment of the bonds that funded the improvements must still be made.”
Dougherty said he could not support the city’s overall budget because of the utility-related debt service payments for The Falls.
“One of the problems is, regardless of your legal opinion, I just have a personal issue with ratepayers’ money going out to pay for a bond they didn’t vote on,” Dougherty said.
Since March 2011, the city has paid a portion of the debt service payments for The Falls development, which includes Bass Pro Shops, Hobby Lobby, Mardel and Cheddar’s Casual Café, to protect its credit rating. The 2012-13 proposed budget, however, was the first that has considered the use of utility funds to go toward the projected shortfall for The Falls at Crackerneck Creek.
“It comes down to a business-like decision, and that’s what we’re mandated to follow,” City Manager Robert Heacock said. “It’s not a random assignment of the cost to the utility – it is based on their share of the obligations that would have been covered had the funds materialized. ... Even though it’s a relatively small amount, I appreciate the due diligence and the opportunity for us to clarify that it was based on a business-like decision.
“Unfortunately, the project has not fulfilled to date. We’re still working diligently to try to bring businesses to that area.”
