City Manager Talks Debt, Budgets and Building Projects

SIDNEY-- On Wednesday, September 4, Sidney City Manager David Scott met with the Sun-Telegraph to go over details of this year's Sidney City Budget and answer questions on details of the budget and other matters. The City of Sidney held its Budget Workshop a few weeks ago on August 7, and many details for this year's budget were worked out at that session. We wanted to allow Scott to discuss some of the budget items in detail and clear up any misconceptions others may have about the process.

Scott started the discussion by talking about what seemed to be misrepresentations about Sidney's debt that had been making the rounds on social media pages. He noted that key details were left out of the representations of Sidney's debt, the biggest being the state-mandated expenditures resulting from the 17J Link project back in 2020 and 2021. The State of Nebraska mandated that project, and the City of Sidney had to come up with 20% of the total costs of the project, while the state paid 80%.

"There was no option for us, the state came in and said this project has to happen, and we had to pay 20% of the costs. That expenditure is left out of the numbers and explanations people have seen on social media. If you look at the actual debt, we refinanced that number down in 2020 and 2021 and saved quite a bit of money for the city. People claimed that I just pushed debt down the road for later, but I have never ever pushed any debt further out than it was originally intended." The refinancing Scott mentioned adjusted interest rates down from 2% - 4% to .70% - 2.83%.

Since the 2018-19 budget, $11,638,000 has been paid down in debt, which is about 32% of the existing $36 million of debt in 2019. "When we refinanced, it allowed us to save money on interest which really helped and allowed us to meet other needs so you don't have to push debt out further or do other things you probably shouldn't do. My predecessor cut budgets very deeply in 2017-18 when I was Finance Director, we didn't have any part-time staff, and I think that we still don't have any part-time staff at the library," said Scott.

Scott was making the point that the City of Sidney did not have a bloated budget, to begin with, so any cuts that would be made now or over the past few years would have negatively affected the basic services the city provides. "We inherited a great deal of debt, but that wasn't mine or my predecessor's doing. That was when Cabela's was chugging along and we were building neighborhoods every other month, and thought the property taxes were always going to be there to support that debt, and it's there until it's not. So we had an enormous debt we had to pay. It is what it is. You just have to put your nose to the grindstone, keep costs low, and try not to take out new debt. The only one that we've done is the Highway Allocation, and that would be related to property tax. We did do the trail and parking lot projects, but that was done with the approved sales tax initiative. The only thing we've taken out since then is the one we had to, the Highway Allocation bond. We've tried to keep it lean over the last seven years, and you can clearly see we went from 36 million (in debt) to $23 million," Scott said.

There was also a reduction in the dollar amount of requests for the budget by $236,494.

"This is such a great conversation to have. It's such a good point to mention. A lot of people think that municipalities in Nebraska can just save up money, so they think, why would you take out a bond or debt? The state does not allow us to do that. If you have too much money in reserve that's not committed to a specific thing, or an amount the state mandates you to have, like for example, we have to have so much set aside to close our landfill if we need to do that abruptly, you can have money set aside to do something like that. But other than a few instances, the state does not allow you to have a lot of savings, because if you do they tell you your property taxes are too high and you have to cut them."

Surpluses can be used to retire debt. "We've not really done that because we haven't had big surpluses to do that. But we have retired some debt and that's why when we say we're going to cut not only the mill levy, but actually the dollar ask this year it's because we've paid off two bonds. In the current fiscal year which ends at the end of September, we've retired two bonds. So now with those payments, what a lot of cities will do, is they'll grab those payments they were making that they don't have to anymore and put them into the general fund and start increasing their spending. We've retired two bonds and we're giving that money back to the taxpayers," said Scott.

Switching over to the Rural Workforce Housing Initiative, $1.5 million was allotted to build homes in the Prairie Winds subdivision. Currently, $670,000 of the $1.5 million has been committed to building projects. "In 2023 we applied through PAD for a $1 million grant, and generally it was a 50/50 grant, so if you asked for $1 million, you had to also come up with $1 million to match. But that year they had a bunch of leftover ARPA (American Rescue Plan) money and they mixed it in to boost it up, doing a 2-for-1 deal. So we asked for $1 million, and the Nebraska Community Foundation was very generous and matched that with $250,000, and the city put in $250,000 to get $1.5 million. When you can get $1.5 million dollars for $250,000, that's a pretty good deal. So we have $1.5 million to loan out to developers looking to build here at a decent interest rate. The interest rates are 2% but if they don't sell or don't finish in 18 months, the rate goes to 2% plus prime. The money is not meant to sit out there, it's supposed to go out and come right back as an incentive to build."

Currently, $670,000 of the $1.5 million has been allocated. There are other loans the builders have taken out with local banks, which is also good for the area's economy. Scott said that he's had at least two other developers reach out in the interest of building here in Sidney. These inquiries are still in the discussion phases, and no contracts have been signed yet.

Not surprisingly, Scott anticipated delays in the Sentinel Project, which is currently in a holding pattern as work on funding issues continues in Washington D.C. "We kind of knew that was going to happen, so we're not surprised. We know they're not going to be at their peak in 2025. It doesn't take, pardon the pun, a rocket scientist to figure out that they're not going to be on the schedule they originally planned. I don't think a delay hurts us here in the region, actually, it will help us prepare and develop housing and things necessary for the project," said Scott.

Another challenge was an increase in Health Insurance premiums for City of Sidney workers. Scott said, "We had a lot of claims over the past year, and it wasn't like it was from one thing, like a COVID outbreak. It was just the cyclical nature of claims, and we just had a lot last year. It gave us a significant rate increase. We had little or no increases for the past few years, and the last time we had a big rate increase was about five years ago."

Two million dollars in Grant Revenue was forecasted for the budget, which seems to be quite a lot of money for grants. Scott said, "This is a really important topic to touch on. I know there are concerns when you see the budget growing, but what you don't realize is there is also that much growth in revenue as well. The reason for this is the city and its affiliates have been so good at securing grant funding. The reason we budget for these is because if we don't and you get the money, then you have to go back to the state and beg them to re-do your budget because you didn't budget enough expenses, not to mention the revenues to cover them. The reason we budget these things is so we don't have to go back to the state and waste time with new budgets. Many of these grants are time-sensitive, and delays like that can result in loss of funding. With supply chain issues still around, you can't have any delays when it comes to these grants, or you might lose them."

For additional information or to view budget numbers and documentation, go to https://www.cityofsidney.org/357/Audits-Budgets-Other .