Hailey officials have started testing the waters to gauge public support for a levy or general obligation bond to restore the city's capital improvement fund, saying they can no longer rely on real estate developers to pitch in for major capital improvement projects.
"Those funding sources have dried up," said Mayor Fritz Haemmerle at a City Council meeting Monday.
As a result, the city's capital fund balance as of Jan. 30 was $1.7 million, but will soon be down to $1.3 million after a portion is spent on the rodeo arena interpretive center.
Public Works Director Tom Hellen said the fund will be reduced again to "under $1 million" following the reconstruction of Woodside Boulevard this summer.
"What this city needs is a general obligation bond [to restore the fund]," Councilman Don Keirn told the council during its meeting last week.
City Administrator Heather Dawson said the city's current levy rate is only one-quarter the rate allowed by state law. She said the city could pass a tax increase of $40 per year per $100,000 property valuation, which would bring in $400,000 annually.
Dawson wrote in a memo to the council that the city's capital fund is tied by state law to a specific capital improvement plan and identified projects.
Councilman Pat Cooley said passing the levy increase would require an "educational battle."
"The November election will bring a huge turnout," he said.
The rest of the council agreed it was time to begin a public discussion of funding options. City staff provided further details Monday night.
Hellen said the proposed capital levy would provide a "permanent solution" of about $345,000 per year for "catching up" with street repairs and other necessary projects that have mounted over the last four years.
Those projects include resurfacing of about six blocks of East Myrtle Street at an estimated cost of $600,000 and a $2.1 million reconstruction of streets in northeast Woodside.
Dawson said a $200 million decrease in Hailey property valuation last year resulted in a concomitant decrease in the city's legal bonding capacity, to a maximum of $16 million.
Dawson said a $10 million general obligation bond would go further, quicker than a levy increase in covering the cost of capital improvements, but would also raise taxes about three times as much as the proposed levy.
The discussed $10 million bond option would increase property taxes $120 per year per $100,000 property valuation for 10 years.
Exemptions exist for the first $100,000 valuation for every home used as a primary dwelling, an exemption that will do little to ameliorate the pain for residents like Lowell Thomas, who owns nine homes in Woodside. Thomas pleaded with the council Monday to "hold off" for a year or two with any proposed tax increases, due to the current recession.
"Last year my assessed values dropped 10-15 percent, but my taxes rose 10-15 percent," he said. "I lost five tenants who could no longer pay their rent. People don't have any money in this community anymore. They are reaching the breaking point and leaving the community."
When the building boom was in full swing in Hailey, the city was able to stash away enough money to complete several capital projects with revenue from developers and fees collected for building permits and inspections.
Several annexations brought on-site and off-site improvements to the city, beginning in 1992 with the North Star subdivision. That development, and the nearby business development that brought Albertsons grocery store, helped fund a traffic light at McKercher Boulevard.
In 1994, the 29-lot Foxmoor subdivision developers paid the city $110,000 to pay for water and sewer system impacts. The developer also helped to fund a highway widening project at the south end of town and a traffic light at Fox Acres Road.
In 2001, Airport West developers also helped to fund those projects, along with the Idaho Transportation Department.
Airport West developers participated in the city's first professional annexation study, which resulted in annexation fees of $1.5 million paid to the city. The first $375,000 of those fees came in the form of five acres of property, upon which the city was able to save $1 million to build a city shop in 2003 on Merlin Loop.
"Those were profitable years in terms of city funding in Hailey," Dawson said. "We were able to build about $1.25 million in capital improvements without going to a bond or levy."
Also during those years, the city's street maintenance obligations grew by leaps and bounds, including most notably Old Cutters subdivision, with about two miles of roads and sidewalks that will have to be kept up for generations to come.
The city was expecting $2.5 million in annexation fees from Old Cutters developer John Campbell, until he sued the city in bankruptcy court to drop the fee. City leaders have said they will not count on getting the money.
The apparent bind the city is in comes as no surprise to members of the City Council, including Martha Burke and Pat Cooley. They have cited studies that indicate that cities cannot rely on developments such as annexations to provide the funding to cover the costs of maintaining ever-expanding city limits.
"Development doesn't pay for itself," Cooley said.
Now that the streets are in place, the citizens of Hailey are on the hook to keep them in good condition.
Haemmerle said Monday the public will have ample opportunity to provide comment on how to proceed on raising funds to pay for capital improvement projects.
"Eventually it will be decided at the ballot box," he said.
In other Hailey news:
( Scott Miley was awarded Firefighter of the Year, and given recognition for his 20 years on the Hailey Fire Department.
( Jay Cone was appointed by the mayor to the Planning and Zoning Commission, taking a seat left vacant by Mark Johnstone.