No, Wyandotte County is Not Going Bankrupt Mayor Tyrone Garner said the Unified Government is headed towards bankruptcy. But the bond markets tell a different story.

At a press conference in October, Unified Government Mayor Tyrone Garner issued a dire warning.

The government of Wyandotte County and Kansas City, Kansas, he said, was on a “pathway to complete financial ruin.” 

Bankruptcy, he warned, sat just around the corner.

But the bond markets tell a different story.

Earlier this year, the Unified Government (UG) received a decent A1 bond rating with a stable outlook from Moody’s Investors Service. The UG also has not informed bondholders of any threat of bankruptcy. If Wyandotte County actually found itself on the verge of financial collapse, it would have been required by law to warn the investors who might buy its municipal bonds that the UG was a dicey bet.

“Bankruptcy is not happening,” said Angela Markley, who represented District 6 on the UG Board of Commissioners for 12 years until her term ran out this month. “That doesn’t mean we don’t have any financial problems to solve. It just means that our problems are solvable.”

The relative health of the county’s finances is complicated in ways that open the door for politically charged assessments of its balance sheet.

Residents have complained for years about high property taxes and burdensome fees attached to utility bills. Longtime residents recall the corrupt machine politics that dominated Kansas City, Kansas, before the city and county merged in 1997.

At the same time Garner sounds the alarm of a financial crisis that isn’t reflected by the bond markets — where billions in investments hinge on whether local governments can settle their debts — he’s pressing for giving the mayor’s office more power. That could include the ability to undo the merger that remade Wyandotte County more than a quarter-century ago.

Meanwhile, County Administrator David Johnston said major financial challenges need to be addressed in the coming years. But he said deconsolidating the joint city-county government structure may not fix the underlying problems. In Markley’s eyes, it could make the problems worse.

Prospect of a Wyandotte County Bankruptcy

When Johnston was hired in March 2023, the UG was upfront about the financial challenges facing Kansas City, Kansas, and Wyandotte County.

They included a high amount of debt relative to property tax revenue, low sales tax revenue and long-term pension obligations for government employees.

But Johnston became concerned when he looked at the UG’s long-range financial forecasts, which showed that the city’s savings would evaporate by 2026.

“That’s where you go, ‘Oh crap, this is dire,’” Johnston said. “We did some things in the budget process, we got more revenue that just bought us time. We now have the real work to do to keep our government and its operations sustainable.”

He said that if the UG does not change course, it will be bankrupt by the end of the decade. And that, Johnston said, would trigger “state receivership,” similar to bankruptcy, where the state of Kansas would nullify the UG’s contracts and union agreements, seize control of the commission and take a “meat cleaver” to the budget.

But Markley said that many other things would need to go wrong before bankruptcy, or receivership, could happen in Wyandotte County. And Kathleen VonAchen, the UG’s former chief financial officer, said it’s not legally possible for the UG to file for bankruptcy or enter a state receivership.

Disappearing Fund Reserve — That Never Actually Disappears

The UG has two fund reserves: one for Kansas City, Kansas, and one for Wyandotte County. For years, financial forecasts have warned that the city’s reserve would eventually slip into the red — but that doesn’t mean a financial collapse or bankruptcy.

In 2018, the UG forecasted that the city’s fund reserve would be drained by 2024. In 2021, the forecast said it would be drained by 2026. After this year’s budget season, that’s been pushed to 2029.

The forecast is almost always red, Markley said, because it includes projects that the commission wants to complete but will likely have to postpone when the time comes. The forecasts assume that the commission takes no action to balance the budget.

“When you look at those future years, you’re seeing a wish list rather than a reality,” Markley said. “As the budget year actually comes to fruition, we have to look at those things and say, ‘Well, we can’t do that, and we can’t do that, and we can’t do that.’”

The commission must pass a balanced budget every year, and in order to do so, it either cuts costs or increases taxes. The forecasts assume the UG commission just ignores the prospect of deficit spending.

Markley said she can’t imagine a situation where the UG goes bankrupt, short of apocalyptic circumstances.

“It would have to be a situation where our property taxes decreased so much and so suddenly,” she said, “that there was no way the commission could cut enough services or projects to get the budget into black.” 

Even in that scenario, municipal bankruptcy is not possible in the state of Kansas, said VonAchen, the UG’s former chief financial officer.

Because the Kansas Legislature has not authorized federal Chapter 9 municipal bankruptcy, she said, Kansas tax entities like the UG cannot file for bankruptcy.

Painful Reality of Balancing the Budget

The Unified Government may not be going bankrupt, but its finances remain troubled.

For decades, the county has been operating under a “structural deficit” that requires the commission to regularly revise the budget to avoid spending more than it takes in.

Markley credited Johnston for looking for a long-term fix for the problem.

“That’s fantastic,” she said.

For starters, Johnston said, the county needs to trim its debt. About 44% of the UG’s property tax revenue on the city side pays for debt, he said, which is higher than what he’s seen in other cities.

To get that number down, he said, the UG will need to spend less on street improvements and construction.

“We try to meet the social needs, the capital needs, our other service needs of our citizens,” he said. “Sometimes you have to take a step back and get real. We’ve been living outside our means.”

Aside from capital improvements, he said that the UG should also be prepared for internal “belt-tightening.”

At the same time, Johnston knows that many Wyandotte County residents already struggle with the taxes and onerous government fees — particularly the payment in lieu of taxes (PILOT) fee attached to BPU bills. 

Johnston said that the PILOT fee was originally much lower — around 6% to 8% from 1997 until 2008.

After the 2008 recession hit, the UG increased the PILOT fee dramatically to compensate for falling property tax revenue in 2009. The problem, he said, is that the commission never brought the PILOT fee back down to pre-recession levels. Instead, it has remained at 11.9% — twice as high as it was in 2000.

But if the UG wants to decrease the PILOT fee to pre-recession levels, it will need to cut more than $10 million from its budget. And that makes it harder to make ends meet.

Is Dissolving the Unified Government the Answer?

At an October press conference, Garner and the mayors of Edwardsville and Bonner Springs floated the idea of dissolving the Unified Government, citing a looming financial crisis.

“That promise (was) presented to Wyandotte County back in 1997 from those that said that we need to consolidate to replace a machine,” Garner said. “It appears that that machine has been replaced with a bigger machine that is now operating on all cylinders.”

Garner declined an interview request for this story, and did not respond to a written list of questions before publication. 

“I’m really proud of how far we’ve come,” Markley said. “To hear somebody from within our government cast aspersions on the professionals that we have within our employment now, it’s really discouraging.”

Johnston said it’s not clear whether ditching the UG and returning to separate city and county governments — after all, one motivation for consolidation was saving money — would fix the money problems.

“Spending more than you’re getting into your revenue stream — if deunification happens, you still have that problem to deal with,” he said.

Looking at the evidence of what the UG has seen over the past 26 years, Markley said, it’s difficult to argue that overhauling the consolidated government would erase the money shortfall.

Markley said Kansas City, Kansas, residents saw significant property tax relief immediately after the 1997 consolidation.

In 1995, the city property tax rate was around 6.4% of assessed value. Five years later, this decreased to 5.4%, and in 2023, the property tax rate is 3.8%. 

“Anybody who’s foolish enough to think that deconsolidating our government would be a financial benefit,” she said, “clearly hasn’t looked at that data.”

Josh Merchant is a local government reporter with The Kansas City Beacon, where this story first appeared. The Beacon is a member of the KC Media Collective.