City Faces Fiscal Shortfall Due To Lack Of FEMA Funding

The O'Neill City Council met for its first meeting of the new year Monday, Jan. 6 with all the council members present.

The Council discussed a fiscal shortfall of the street department and the subsequent shortfall caused to the general fund from funding of 2019 flood damage that FEMA promised money that they approved and later denied. 

The March 2019 bomb cyclone severely damaged some of the O'Neill streets, which came with a fixed price tag of 2.9 million dollars.

The City of O'Neill applied for FEMA emergency money early on in the process to help with the funding, which left not only O'Neill but much of the eastern part of the State of Nebraska asking for FEMA money.

The city waited, as most do when it comes to dealing with the federal government sending requests for updates on funding. As of May of 2022, the city was under the impression given by FEMA that they would receive 2.9 million. In early 2024, the city was told they would not get the amount requested and are now hoping to make up $400,000. The city has taken every avenue available to them to get the funding, but as of January 2025, nothing is clear except the fact that the city will need to find alternate means of making up the price tag.

The city has used money from the general fund to help with the project and needs to finance $1.7 million. To alleviate the debt, the city asked Scott Keene with Piper Sandler to advise and assist with bond funding.

Keene advised the city that the chance of getting reimbursement from FEMA was looking bleak and that they could fix the shortfall from the General Fund with Highway allocation Bonds. This form of financing is available to the city because the capital expenditure was not to fix a shortfall in the general fund but to fix the shortfall in the street departments' budget because of the disaster.

The city has a couple of options to fix the funding gap left by FEMA.  The obvious one would be as a taxing authority to raise taxes to pay for the debt or special assessments, but with the amount, other options are also available, such as Highway Allocation Bonds. Late last year the city borrowed two CDs from Tri-County Bank and have a line of credit with Pinnacle Bank to alleviate growing fiscal pressure.

Keene told the Council they would be looking at financing $1.7 million at 6.5 percent with a debt service payment of $156,000 per year. The financing would be covered by a gas tax that the city receives annually. The tax is relatively the same year to year with slight fluctuation. This year's revenues are $562,000. The tax is already funding a bond from the paving project from 2021 on Hynes Street.

"The City is using about 65-75 percent of the funding available from the amount of gas tax being generated, so you are still sitting pretty good on your funding options. Just so the Council knows if for some reason the gas tax funding would go down, you still have the option to levy taxes to meet the payment obligations on the bonds," said Keene

"As a council, you made the right decisions at the right time. There was no way you would have known that FEMA would not come through with the full payment." Said Keene. 

"The street fund has a significant debt caused by FEMA reneging on their payment; the street fund is the general fund's responsibility and does not have enough to float it. The Council tried, and with no confirmation from FEMA, you need to address the cash flow by doing a bond," said Lori Olson, the city auditor from Dana F. Cole.

The City Council decided to move forward with the bonding process by having special meetings scheduled for Jan. 13 and 27 and the final reading of the proposal on the Feb. 3 meeting to get the bonding process going.

The Council heard from Kevin Seger, the O'Neill Solid Waste Manager, about the approval of the increase in garbage rates. The Council looked at increasing the rates last fall when making the budget. Seger also asked the Council about raising the rates on construction dumpsters. Due to the low rates, Seger said customers could keep the dumpsters for much longer than needed, and we would be able to free up the use of more units. City Attorney Boyd Strope commented that he had to rent some dumpsters in Knox County for an estate, and their rates were significantly higher than what the city was charging. Seger also talked to the Council about changing some garbage pickup routes on Monday and Tuesday. Seger said the Monday route was unnecessarily long, and Tuesday was much shorter, so he would like to take some of the Monday route and incorporate it into Tuesday to make it more efficient. Seger said he would like to start on Feb. 1 so he has time to notify the residents who will be affected.

The Council approved the bills before adjourning for the evening.

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