McCall Idaho Headline News

We would like to express our gratitude to The Star-News in
McCall, Idaho for allowing us to re-print their articles.
To subscribe, visit www.McCallStarNews.com
or call (208) 634-2123

McCall News Archives: 2004 2005 2006 2007 2008

The Plan: McCall council proposes paying St. Clair, Wausau
$900,000 soon, the rest later
TOM GROTE | May 31, 2007
THE STAR NEWS

The McCall City Council last week decided on a multi-stage plan to pay off a $6.5 million court judgment over construction of the city's winter sewage storage pond.

The council decided not to declare municipal bankruptcy as part of the plan, but Mayor Bill Robertson did not rule out that option for the future.

During last Thursday's regular meeting, council members endorsed a plan by city Manager Lindley Kirkpatrick to pay off some of the judgment within the next few months and then seek court approval to borrow the rest.

All of the funds would be paid by city property owners and residents, either through additional property taxes or monthly sewer fees.

Meanwhile, the city will continue its fight in court to have a federal judge's order overturned in order to cut back the amount of money owed.

The plan adopted last Thursday would pay off the $5 million jury judgment plus $1.5 million in attorneys fees and interest stemming from the 2004 trial over construction of the 277-million gallon J-Ditch pond along West Deinhard Lane.

A jury said the city and its engineer, JUB Engineers of Boise, badly mishandled the events leading up to the firing the original contractor, St. Clair Contractors, and a contractor hired by

Employers Insurance of Wausau to finish the job.

The city council chose not to declare bankruptcy, which it considered an action of last resort, Kirkpatrick said in an interview.

"We wanted to avoid the negative perception of bankruptcy, the stigma," he said. "But there is more perception than reality to bankruptcy, as the practical effects are no where as severe as one might expect."

Robertson said declaring bankruptcy could harm the city's economy.

"McCall is a resort community; we depend on people bringing money to town and investing it," he said.

However, the city might still declare bankruptcy to seek protection if anyone tries to challenge the funding plan, Robertson said.

' The plan adopted last week "is our best attempt to comply with the judge's order," Kirkpatrick said, referring to the April 23 directive by U.S. District Court Judge Lynn Winmill for the city to pay the judgment immediately.

Here are the major components of the plan:

Break the Piggy Bank
The city will pay as soon as possible about $300,000 in surplus funds leftover from the 2006-07 fiscal year that ended Sept. 30, 2006.

In past years, the city has used whatever surplus funds have been left from the previous year to fund projects during the current year. That will not happen this year, Kirkpatrick said.

A public hearing on using the surplus to pay the court judgment will be held during the council's next meeting starting at 6 p.m. Thursday, June 7, in the lower level of McCall City Hall. The funds would be available to turn over to St. Clair/ Wausau by early July.

Tax to the Max
The second part of the plan would see the city levy as much property tax as allowed under state law and give the difference between what the city collected this year and the maximum amount toward the court judgment. That amount is expected to be about $600,000.

The city has $3.3 million in property taxes budgeted in the current budget year. State law allows additional property taxes to be raised two ways:

• The amount of property taxes from new construction inside the city limits or from annexations. That amount is expected to be about $284,000.

• No more than 3 percent of the previous year's total. That is calculated at $93,000 for next year.
The city has not always taken the full 3 percent tax increase, but state law allows the city to bank those "foregone" funds and use them in the future if needed. The city currently has $231,000 in that account.

Those property taxes will not be available until 2008, but the city plans to borrow the $600,000 in advance in order to satisfy Winmill's order to pay immediately, Kirkpatrick said.

Borrowing the money will incur interest payments, but Kirkpatrick did not know how much those interest costs will be.

Scour the Seat Cushions
The council also ordered Kirkpatrick to squeeze as much money as possible out of the current budget.

Those instructions included a review of the city's policies on how much money to keep in its reserve funds.

The funds are used as a hedge against emergencies and also to keep the city running until property-tax collections are received.

Such short-term funding allows the city to avoid borrowing money while waiting for tax payments.

Bond, Long-Term Bond
The city has no choice but to issue long-term bonds to finance the balance of $5.6 million, Kirkpatrick said.

Authority to issue the bonds without voter approval must come from a state judge, who must declare the expense to be funded is "ordinary and necessary" to the operation of the city.
It could take six months to schedule a hearing before a judge at which any citizen may testify, he said.

Interest costs also will be associated with any long-term bond, but Kirkpatrick said the interest rate and number of years to pay back the bond has not been decided.

Take on the Judge
While the city works to raise funds to satisfy Winmill's order, the city council told its attorneys to keep fighting the order in court, Kirkpatrick said.

The city disagrees with Winmill's assertion that he, as a federal judge, can waive taxing provisions in state law. Specifically, the city claims Winmill does not have the authority to allow the city to exceed the 3 percent cap, so it will appeal to the Ninth U.S. Circuit Court of Appeals.

If the appeal court sides with the city, then the amount above the 3 percent cap, or $5.6 million;: would be repealed.

Gaining a hearing before the court of appeals could be at least six months, Kirkpatrick said.

PLAN SUMMARY

Here is a summary of the plans by the McCall City Council to pay off the $6.5 million judgment owed in the Wausau/St. Clair case:

• Pay all surplus funds in city coffers as soon as possible. Funds available early July - about $300,000.

• Borrow money equal to the amount of property taxes that can be levied by Idaho law above what is now being levied to run city government. Funds available late summer or early fall - about $600,000.

• Issue bonds to cover the balance of the judgment, an action that requires a state judge's permission. Funds available no sooner than six months - $5.6 million.

• Look for any other savings in the current city budget, including a review of policies on maintaining-reserve funds. To be done over the next several weeks.

• File an appeal with Ninth U.S. Circuit Court of Appeals to overturn a U.S. District judge's opinion that the city can exceed property-tax collections caps in Idaho law. If that happens, the city would not have to pay $5.6 million. Ruling expected no sooner than six months.

Also to be decided is whether the long-term bond will be paid with an annual increase in property taxes or a long-term increase in monthly sewer fees, he said.

McCall Idaho Headline News

The Plan: McCall council proposes paying St. Clair, Wausau $900,000 soon, the rest later TOM GROTE | May 31, 2007 THE STAR NEWS

The Plan: McCall council proposes paying St. Clair, Wausau
$900,000 soon, the rest later
TOM GROTE | May 31, 2007
THE STAR NEWS