Council settles project lawsuit
Tonganoxie taxpayers will pay an estimated $32,100 more for the renovation of Fourth Street than earlier expected.
The additional assessment on all city taxpayers was the result of a compromise reached between city officials and three downtown property owners who filed a lawsuit against the city. The property owners maintained that the city had charged downtown owners $30,000 more than originally promised. In addition, they said a $2,100 assessment was erroneously added to the amount downtown business owners were to pay.
The lawsuit blocked the city's plans to issue general obligation bonds to finance the project.
"Everything was ready to go for yesterday, but as part of the closing agreement, there could be no outstanding litigation," City Administrator Chris Clark said Tuesday.
The three plaintiffs Roger Shilling, Jean Lenahan and Don Pelzl reached a compromise with city officials Monday afternoon. As part of the agreement, the three agreed to drop the suit.
Shilling said he was pleased the city agreed to charge the downtown property owners what he said was a fair amount.
"This is what we've been after all along," he said.
Now, the downtown benefit district will pay about $170,000, which is equal to $150,000 in assessments, plus half the cost of the bond issue.
Monday night, Tonganoxie City Council members approved about $635,000 worth of general obligation bonds to pay for the Fourth Street renovation project and surface work on West Washington Street.
The city had little choice, but to settle, Clark said. That's because the temporary notes that financed the renovation project come due Dec. 1.
"When the lawsuit precluded those bonds being issued, the city was left with no alternative other than to settle," he said.
The city is using a different mechanism to find a buyer for the bonds. That mechanism required that the city refinance an old bond issue in this case is was a 1992 issue that has $25,000 in outstanding debt. So the amount of this new bond issue is $25,000 higher than originally planned only because the city had to add the outstanding debt of the old bonds onto the amount of the new bond issue. The move should not cost the city more money, Clark said.
"We don't have enough time to go through a traditional borrowing process for the general obligation bonds," Clark said.
The city council will conduct a special meeting at 7 p.m. next Monday, when Clark expects the city to have found a bond buyer. He said he expects the interest rate for the bond issue to fall between 5.2 to 5.25 percent.
Assessments to repay the bonds will appear on the 2001 tax bills, which will be paid in 2002, city officials have said.