Ever-higher construction costs and a slowdown of revenue growth are putting the squeeze on Overland Park’s building and maintenance budget, to the point that some projects may have to be removed from the five-year plan, City Manager Bill Ebel said Monday.
Because of those tightening constrictions, Ebel recommended the city put off for at least five years repairs to the Turkey Creek Trail, replacement of the Westlinks Golf Course fence and improvements to 167th Street from Metcalf to Antioch. The latter is a $30 million project that includes state-owned bridges. Antioch Road from 167th Street to 179th Street, a $20 million project, was also removed from the plan so the city could afford to do other improvements, Ebel said.
Ebel presented the city staff’s update of the five-year budgeting plan for capital improvements and maintenance to the city council committee of the whole. The 2021-2025 capital improvement budget is proposed for $207.5 million, up 7.7 percent from the last five-year plan. However the maintenance budget was down 4.8 percent, to $118 million. Those two budgets are separate from the operating budget, which covers day-to-day functions of city departments.
Updated plan removes $5.9 million in planned infrastructure investment
Spending on maintenance would be reduced overall by $5.9 million, with the heaviest hits coming from parks and stormwater maintenance. Only street maintenance did not get a proposed reduction.
The projects Ebel listed for removal were higher profile ones. The council found out recently that it could cost $7.6 million to fully restore the trail, which has been partly blocked by a rock slide for two years. The Westlinks Golf Course fence issue is a long-running dispute with the Nottingham by the Green neighborhood that could cost the city $365,000 to replace a decorative iron fence at the city-owned course.
The city’s financial position has been changing as construction costs increase and the growth of revenue slows, Ebel said. Meanwhile the debt service has grown 4.9 percent from the last plan, he said. The total debt last year was $97 million, he said.
At the same time, construction costs have risen 7.7%, he said. The biggest spending increases proposed have been in street improvements which would jump from $1.47 million in the last five-year plan to $11.6 million.
The arboretum visitor center is a banner project that has come in at higher construction costs than originally planned. The cost has risen to $17 million from the originally planned $13 million; $10 million of that is supposed to come from private fundraising.
Councilmember Paul Lyons said he is concerned about the chances that the city might have to pay more because of that.
Other council members also questioned Ebel about the city’s exposure to refund property taxes to big box stores that win “dark store” court challenges and about how tax incentive packages impact the city’s bottom line.
Ebel said the city has been gradually cutting costs internally and spending down reserves to meet the revenue challenges without increasing taxes, but that now there are few things left to cut. The city has set aside $600,000 to pay for the most immediate dark store refunds, he said. But there are too many unknowns to figure those refunds and tax incentive impacts very far out, he added.
Councilmember and mayoral candidate Faris Farassati said later the city must consider how tax incentives to developers could affect later budgets, especially if there is a recession, as some economists have predicted.
“We are being told that OP’s 5 year budget is stable when the negative impact of TIFs and other tax giveaways so far and the ones in future, dark store theory, potential recession and tariffs are not considered and the city needs to spend its cash reserves to maintain its services at current levels,” he said. “This does not portray a strong financial portfolio. While many of these parameters may be out of our reach, we can stop our current practice of authorizing unnecessary and illogical tax giveaways.”
Ebel also warned council member that they will have to think ahead to plan for special sales taxes that have expiration dates. The special sales tax funding the new courthouse brings in $4 million a year to Overland Park, but that money will dry up when it sunsets in six years, for example. Another one-eighth cent sales tax is due to end in 2024 if it is not renewed by voters.
“I think this next decade is going to be transformational for the city,” Ebel said. “We turn 60 years old in May of 2020 and there will be increasing pressures over the next decade for maintenance and investment.”
Council members asked questions but took no action on what was a first look at staff recommendations for spending. The council will hold more meetings on it and a public hearing March 16 before voting on its adoption April 6.