Johnson County Council updates 2026 budget after growth-appeal shortfall; highway bond and council stipend line items adjusted

Johnson County financial staff told the County Council on the second reading of the 2026 budgets that the county does not qualify for a state growth appeal, and they presented a revised fiscal plan that cuts or reclassifies several large line items to preserve balance.

County financial consultant Mike Reuter told the council that “we're not going to mathematically qualify for the growth appeal on '26,” explaining the county’s three‑year average growth factor remained roughly the same while the statewide comparison number rose. Reuter said the county had expected to net roughly $1.9 million from a successful appeal but that the Department of Local Government Finance (DLGF) published a higher statewide growth factor this year that excluded Johnson County from qualification.

The failure to qualify prompted Reuter to rework the fiscal plan. He said the county will remove large rollovers previously shown in the general fund and track highway bond payments on a new line so those outlays are easier to monitor. “Originally in the '26 budget there was a $12,000,000 request,” Reuter said, “we were actually planning on using $12,000,000 from the general fund, $15,000,000 from the EDIT fund, and then we'd be doing the $40,000,000 bond issue to fund the first phase of all the highway projects.” He said his revised plan replaces some of those rollovers with an explicit bond payment line and assumes council commitments that were already made (a $4 million appropriation for the highway fund and a smaller capital carryover).

Reuter and Highway Supervisor Luke Masten told the council that changes to the timing and structure of a planned general‑obligation bond could keep 2026 fiscally stable but require choices now. Reuter said the county’s assessed valuation rose strongly and that, because of that growth, “the bond issue now can be paid off all in the first year, because we have so much capacity now,” which would lower the overall tax rate for 2026. He also warned, however, that Senate Bill 1’s property‑tax credit mechanism reduces the debt‑service fund’s available cash and that the DLGF’s levy calculations may not reflect that loss; if the DLGF ignores the credit in its levy certification the county could show a negative debt‑service cash balance in 2026 that would have to be covered from the general fund unless the bond structure is adjusted.

Reuter presented three broad options to address that timing and credit risk: (1) accept the potential one‑time general‑fund make‑up payment in 2026; (2) sell the bonds with a premium (generating extra proceeds at issuance) to cover the anticipated shortfall; or (3) delay or re‑size the bond request and refile the bond proceedings so some debt is pushed into later years. He said staff could work with bond counsel to set a calendar and determine the deadline for any decision to adjust the bond size before December 31.

The council also acted on a $1 million placeholder for council stipends that had been carried in both the general fund and the food‑and‑beverage fund in earlier drafts. After discussion the council voted to remove the $1 million appropriation from both funds for now so the general fund would be in balance. Council members and staff agreed to revisit the stipend question after staff runs final payroll‑based counts and cost scenarios; members asked that any final payout rules include an eligibility date (six months of continuous employment, with payment by March 2026, and the employee still on payroll at the disbursement date).

Separately, county leaders discussed moving recurring operational expenses related to the sheriff’s office and the jail from the general fund into the county’s Local Income Tax (LIT)‑funded jail fund where appropriate, a step several council members and the sheriff’s office favor because it shifts some burden off property‑tax–funded accounts. Highway staff also proposed moving multi‑year project appropriations out of the operating forecast so year‑to‑year spending is clearer; Reuter recommended allowing appropriations to “die” at year end and re‑appropriating unspent balances in January so the forecast shows only recurring commitments.

Council President Kayla Burton and other members asked Reuter and staff to keep tracking the DLGF calculations closely in case there are calculational errors or late changes that would reopen a growth appeal; Reuter said the county has until Oct. 21 to file an appeal if new data emerge. He added that the DLGF memo showed some typographical errors in places but that the agency’s published statewide growth factor (1.0991 for the comparison number this year) was the value being applied.

The council adopted the revised budgets and line‑item adjustments presented in the second reading that were needed to keep the 2026 fiscal plan balanced pending the bond counsel timetable and the final payroll/count figures. Many departmental budgets were approved as submitted (public‑health, parks, extension, conservation, and others), and staff will return with more detailed bondstructuring options and final stipend cost estimates.

What happens next: staff will (1) work with bond counsel on a calendar and options if the council wants to change the bond size or sale structure before year‑end, (2) reclassify and track the highway bond payment in a new budget line and treat prior multi‑year earmarks as appropriations that die at year end unless re‑appropriated in January, and (3) run payroll eligibility and cost scenarios for council stipends so the council can decide an exact stipend amount and payout timing when it reconvenes after the county’s binding units are heard.