Frequently Asked Questions

Questions from Barbara Smith, posted April 23, 2008

Q: What changed to warrant the increase in fees for sanitation services?

A: The increase in fees is the result of expenses exceeding revenues in the Sanitation Fund. We have cut expenses from the fund in order to keep from having an increase. We have not had a fee increase in sanitation since November, 2002. We will review the expenses/revenues during the upcoming budget process to insure that any increase is fair and required. It is always our hope to keep the fees down.

Q: Should the contractor for sanitation services not provide all his own administrative personnel?

A: The City contracted with Veolia Water in 1989. At that time, Veolia assumed the City personnel and duties for operating the Water and Wastewater Plants. The selection of Veolia was made after a nationwide search and interviews of five firms. The Public Works contract was added in 2002. Veolia provides their own administrative personnel to handle day to day operations. The City maintained billing for the services and did not contract this out. We bill for water, sewer and sanitation on the same bill. There is very little cost to add services/subtract services to the billing process.

Q: $1 will be added to monthly bills for a franchise fee for the sanitation service. Isn't Veolia a contractor for the City - why would a franchise fee be required?

A: The City Commission asked the staff to seek proposals from companies to own and or operate the City's sanitation business. As part of that process, it became apparent that if the City sells the service, a franchise fee would be required. The City Commission has elected to treat Veolia in the same fashion.

Q: We just entered into a contract extension for these services until 2017. Why?

A: The City had two separate contract terms with Veolia. The water and wastewater services expire in 2009. The contract term for Public Works is 2017. The extension merely places all of the services on the same contract term. The contract has provisions for non performance and cancellation clauses.

Q: Why No Bid on this contract extension?

A: The City Commission has not bid services since the original contract with Veolia was bid. Veolia is required to submit annual budgets for water and wastewater operations each year so the City Commission can control the expenditures in this area. The contract for Public Works provides a cost of living adjustment each year and that is the only increase allowed. There was no real benefit to go through a lengthy process for bidding. The contract is reviewed annually for performance.

Q: Why do we keep getting stuck into long term contracts and then having to modify them on a six month to a yearly basis?

A: We modify contracts as the needed. Many of our contracts are not modified, but simply renewed or bid upon renewal each time.

Q: This was another spending decision by our city officials without due diligence? No research done on what these costs are in other cities? Why?

A: At the direction of the City Commission, the staff spent the last two years researching sanitation delivery in other communities along with seeking proposals for the operation of our sanitation services. The only proposal received was from Waste Management. That proposal was rejected by the City Commission. The changes in sanitation service recommended by Veolia follow the direction of the City Commission during this process.

Q: It is planned to transfer a city employee to Veolia. How can that be done without the proper dismissal of the employee?

A: During the three times that we have expanded services, the City has transferred all employees that were with the City to Veolia. The City required Veolia to take all employees and to provide comparable wage and benefit packages. In many cases, the wage and benefit package was greater from Veolia than the City.

Q: Why did our City Attorney not advise against sharing an electrician with Veolia?

A: The City Commission simply directed the staff to research the possibility of hiring a full time electrician under the direction of Veolia Water versus contracting the services out. If it becomes economically feasible to do this, the City Attorney will draft the necessary documents to complete this transaction. We are a partner with Veolia in a number of ventures and this would work in the same manner.

Q: Why is Veolia using City vehicles, office space and sharing electricians?

A: All of these issues were negotiated during the selection process in 1989. Each item is addressed in the contract. Veolia uses the City vehicles until they are replaced. Once replaced, the City simply disposes of the vehicles in the proper manner and captures the value. The office space used is the same space the City used for these functions when handled by the City.

Q: Are we giving away too much to get companies to locate in Junction City? What has been promised?

A: All of the incentives given to companies are tied to job creation. They are forgiveable loans. Many of the transactions are handled through Spirit of 76. The City uses IRB's privately placed to assist with economic development. IRB's are being used with Edenspace, Ventria, Cap Gemini and New Horizons.

Lead Horse Technology: The local revolving loan fund was used to assist Lead Horse Technologies. Those funds are from a $400,000 Community Development Block Grant that originally went to Murphy Industries in the 1980's. The fund is used to assist industries and retail businesses with low interest loans. All of the principal and interest are required to be repaid. Lead Horse Technology has repaid their $100,000 loan in full.

Unplugged Cities: Unplugged Cities was an given an economic development grant funded by the City of Junction City through general obligation bonds. The $400,000 is covered in a development agreement and is a forgiveable loan if job creation goals are met.

Ventria Bioscience: The IRB for Ventria was handled through G.E. Capital. The City provided $5.5 million to Ventria. Spirit of 76 owns the building. The annual debt retirement is covered by monthly lease payment from Ventria in the amount of $15,000. In addition the debt is retired with proceeds from a grant from Kansas Bioscience Authority in the amount of $1 Million and the City receives a portion of the farm rent that is applied to debt repayment. The balance of the debt retirement comes from the annual City budget.

Cap Gemini: The Cap Gemini $6,000,000 IRB was purchased by University National Bank, Lawrence, KS and Emprise Bank. CapGemini makes monthly lease payments in the amount of $23,810 that help to retire the debt on this IRB. The balance is paid from a annual Economic Development Grant to the Spirit of 76 from the City of Junction City. Spirit of 76 owns the building and equipment.

New Horizons: The New Horizon's IRB in the amount of $1,975,000 was handled through UMB Bank. The repayment of this IRB is from New Horizons. The City is not involved financially with this transaction. The City did purchase the old New Horizon's building on Old Highway 40 for $1.6 million dollars. The building will be sold and debt retired with the proceeds. The annual debt payment is budgeted in the City's budget. Until New Horizon's new building is completed, they are paying rent to the City in the amount of $6,000 per month.