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Joyce Clark Unfiltered

For "the rest of the story"

When my blog site was reconstituted after being down for two weeks four recent blogs disappeared. This is a reposting of one of the four “lost” blogs.

Disclaimer: The comments in this blog are my personal opinion and may or may not reflect an adopted position of the city of Glendale and its city council.

In my last blog I said that I would tackle General Obligation (G.O.) Bonds and Development Impact Fees (DIF). Both are complicated issues and I will do my best to explain their origin, purpose and use.

General Obligation (G.O.) Bonds. These and many other funding mechanisms cities use were created by and are still regulated by the state of Arizona.

The city uses G.O. bonds to fund many large scale capital projects, in other words, it is a major component of its Capital Improvement Plan. Every city must pay the principal and interest on these bonds through its secondary property tax.

However, the state constitution specifically limits the amount a city can borrow for G.O. bonds to 6% or 20% of a city’s total assessed valuation. In Glendale 6% bonds may be issued for economic development, cultural facilities, government facilities and libraries. However, the state constitution allows one exception, granting cities the ability to issue 20% bonds in these specific areas: flood control, open space/trails, public safety and streets/parking. Generally, these are extraordinarily big ticket items. Hence the exception.

Glendale’s total assessed valuation as of June 30, 2016 was $1,174,931,000. Multiply this figure by 6% and we have a figure of $70, 496,000. That $70 million figure is the total allowable capacity in Glendale for 6% debt.  In other words, if Glendale had the ability through the collection of secondary property tax to cover the principal and interest on just the category of 6% debt, it could do so. Now multiply $1,174,931,000 by 20% and we have a figure of $234,986,000 as the maximum allowable in the 20% bond debt category.

OK, we have a maximum 6% debt capacity of $70+ million and a maximum 20% debt capacity of $234+ million. Then why doesn’t the city just issue bonds in these amounts and be done with it?

Because there are two other factors that govern how much debt a city can take on. One is the city’s ability to repay annual debt. State statute mandates the city must pay the principal and interest on G.O. bonds from the secondary property tax it collects. It is prudent for a city to be conservative and try to figure out how much it can pay on debt not just in good economic times but when the economy takes a nose dive as it did for 5 years during the Great Recession.

The other factor is based upon you, the voter. Just because a city has debt capacity that doesn’t mean it can use it. Every city must go to the voters in a bond authorization election and ask for your permission to issue debt in each category for a capped amount of money. The most recent city-wide bond elections were held in 1981, 1987, 1999, and 2007. I won’t go through the whole list and how much bond authorization was approved in each category in each of the listed bond elections. In the last election in 2007 voters approved the issuance of bonds for flood control for a cap of $20 million+); Parks and recreation for a cap of $16 million +; Public safety for a cap of $102 million +; and Streets and Parking for a cap of $79 million+.

Both of these factors determine how much debt a city could take on in a given year. Even if you, the voter, have approved a maximum amount of debt in a certain category, such as flood control, the city must then look at how much debt it can comfortably afford to repay in good years and in bad years.

Another component of the CIP is Development Impact Fees (DIF). For many, many years Arizona lived by the imperative that “growth pays for growth.” It meant that developers had to pay X amount per house and it went into a city’s DIF. It allowed Glendale and every other Arizona city to use DIF to fund new parks, libraries, streets, police, fire, sanitation, water and sewer. It was a good funding mechanism for cities. As new residential subdivisions came on board cities would get DIF funds from the developer that was used, for example, to expand or build a new park. Need a new fire station because of several new subdivisions? DIF was used to offset the cost.

But the developers were not a happy lot.  For you see, DIF was added by them to the price of each new home. They complained that DIF was making their homes cost too much. They lobbied the state legislature and in 2011, SB 1525 was passed. Under this legislation some categories eligible for DIF were eliminated. Others were severely restricted and the formulas for the amount of DIF that could be collected were reduced to make them almost meaningless. This bill restricted every city’s ability to collect a reasonable DIF that followed the mandate of “growth paying for growth.” The state legislature at the behest of the development industry’s lobbyists literally passed on the cost of growth to the cities. And why would legislators do so? It’s understandable.  Many members of the development community contribute serious money to their campaigns.

 Suddenly cities found that in many cases, they simply did not have enough money to pay for infrastructure needed because of new growth in their communities.  If I were to make an educated guess I would estimate that Glendale has lost somewhere between $5 and $10 million dollars in DIF annually. Oh by the way, did developers drop the price of their new homes because DIF was suddenly reduced considerably by their buddies down at the state legislature? The answer is ‘no’… but their profit margins did increase.

© Joyce Clark, 2017          

FAIR USE NOTICE

This site contains copyrighted material the use of which is in accordance with Title 17 U.S. C., Section 107. The ‘fair use’ of any such copyrighted material as provided for in Section 107 of the US Copyright Law and who have expressed a prior interest in receiving the included information for research and educational purposes. For more information material on this site is distributed without profit to those who have not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of environmental, political, human rights, economic, democratic, scientific and social justice issues, etc. We believe this constitutes a ‘fair use’ of any such material. For more information go to http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use,’ you must obtain permission from the copyright owner.

When my blog site was reconstituted after being down for two weeks four recent blogs disappeared. This is a reposting of one of the four “lost” blogs.

Disclaimer: The comments in this blog are my personal opinion and may or may not reflect an adopted position of the city of Glendale and its city council.

On Tuesday, March 21, 2017 the city council had its first substantive discussion of the proposed Fiscal Year 2017-18 budget. It centered on its proposed Capital Improvement Program or CIP. What exactly is the CIP? Quite simply it allows the city to build things that include but are not limited to:

  • fire and police stations
  • libraries, court buildings and office buildings
  • parks, trails, open space, pools, recreation centers
  • water and wastewater treatments plants and their related infrastructure
  • roads, bridges, traffic control devices
  • landscape beautification projects
  • flood control projects
  • computer software and hardware systems other than personal computers and printers
  • major equipment purchases such as landfill compactors, street sweepers and sanitation trucks

There is specific council approved policy that dictates the determination of priorities within the CIP:  “City Council’s strategic goals and financial policies provide the broad parameters for development of the annual capital plan. For example, Council’s financial policies on Capital Asset and Debt Management state that the 10-year capital plan will address capital needs in the following order:

  • Improve existing assets
  • Replace existing assets
  • Construct new assets”

Additional considerations include but are not limited to the following:

  • “Does a project support the city’s goal of ensuring all geographic areas of the city have comparable quality in the types of service that are defined in the Public Facilities section of the General Plan?
  • Does the project prevent the deterioration of the city’s existing infrastructure
  • Does a project encourage and sustain quality economic development?” (From the city’s proposed Capital Improvement Plan budget, Fiscal Year 2017-18)

You get the idea. Things that are physical…things you can touch and see. I do have concerns with the last two items on the above listing of CIP examples – computer software and heavy equipment.

I went back through my stack of old budget books and the first time I could find the addition of computer software and hardware as part of any CIP was in my FY 2008-09 budget book…a mere 8 years ago.  Quite frankly, it was quietly added without any discussion at the time and I don’t remember me or any other councilmember back then questioning or even noticing its addition to the CIP. The same scenario occurred with the line item of major equipment purchases. It suddenly appeared in the CIP.

The city already has a Vehicle Replacement Fund (VRF) and a Technology Replacement Fund (TRF). This is where those two line items belong not in the CIP. If these funds need more money in them to cover these major expenses, then it’s time to allocate more revenue in each of these funds.

It causes me some concern because these big ticket items (major computer software and heavy equipment) could and often do compete for bond funding against the projects our citizens want and expect, such as libraries, recreation centers, adult centers, parks and pools. You know, the projects that maintain and upgrade our quality of life as residents of Glendale and make Glendale more attractive for economic development.

The total proposed funding for projects in the CIP for the upcoming fiscal year is $88,819,541. However, most of this money, $67,610,773 comes from Enterprise funding (water, sewer, sanitation and landfill) in addition to other, dedicated Transportation  funding, HURF (Highway User Revenue Funds) and a variety of grant funds.

The other monies to be used within the CIP are Bond Construction Funds made up of 6% or 20% General Obligation (GO) bonds ($14,994,708) and Dedicated Impact Fees (DIF) funds ($6,214,060).

I don’t want to get into the weeds on 6% or 20% GO bonds or DIF in this blog. My next one will explain those items in more detail. For now is the take-away that the proposed CIP totals $88 million plus.

© Joyce Clark, 2017                 

FAIR USE NOTICE

This site contains copyrighted material the use of which is in accordance with Title 17 U.S. C., Section 107. The ‘fair use’ of any such copyrighted material as provided for in Section 107 of the US Copyright Law and who have expressed a prior interest in receiving the included information for research and educational purposes. For more information material on this site is distributed without profit to those who have not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of environmental, political, human rights, economic, democratic, scientific and social justice issues, etc. We believe this constitutes a ‘fair use’ of any such material. For more information go to http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use,’ you must obtain permission from the copyright owner.

When my blog site was reconstituted after being down for two weeks four recent blogs disappeared. This is a reposting of one of the four “lost” blogs.

Disclaimer: The comments in this blog are my personal opinion and may or may not reflect an adopted position of the city of Glendale and its city council.

For the next 6 weeks or so, the city council will be focused on Glendale’s budget. There will be a series of workshops devoted to it. The first one was held on March 7, 2017 and reviewed revenue projections, sources of the city’s revenues and the areas in which those revenues are spent. Keep in mind, per state law, Glendale and every other municipality must adopt a balanced annual budget. What does that mean?  That means the total of the city’s expenses must be shown to be covered by the revenues it receives.

There are 2 parts to the city’s budget: its General Fund budget and the Enterprise Funds’ budgets. The General Fund budget covers all expenses incurred by the city except for: Water, Sewer, Sanitation and Landfill. These 4 areas are called Enterprise Funds and they get their revenues from rate payers or users.

The pot of money for the General Fund has 2 components: all revenues and a fund balance (a rainy day fund). The money is paid out to 5 areas: expenditures, operating costs, the Capital Improvement Plan, our debt payments and a contingency fund. Except for debt payments which are a fixed cost, the other 4 areas compete against one another for the available money.

Where does the city get its money? From 5 sources:                                                                        

  • Sales tax                      44%                   
  • State shared revenue    26%                  
  • Other                           17%                  
  • Transfers In                  11%
  • Property Tax                   2%

There is one special note about the sales tax the city collects and that is, it no longer manages or collects it. A year or two ago, the state legislature, in its wisdom, mandated that it would collect every city’s sales tax and distribute those funds collected to each city. Now Glendale has to pay the state nearly half a million dollars to collect its sales tax…a new expense that Glendale never had before. To add insult to injury, this program rolled out completely in January of this year, 2017. To date, the state has only collected and dispersed approximately 66% of the money Glendale itself usually collected. I contend that in addition to our regular budget planning for next year, the city should be planning an alternate budget in case the worst happens and it does not receive all of the sales tax from the state to which it is entitled. 

There’s also another gimmick the state uses and that is with regard to state shared revenue. The largest component is state shared income tax. Every year we pay income tax to the state but cities do not get their share the following year. Instead the cities are paid two years later. That means the income tax you pay this year for 2016 won’t be seen by the cities until 2018. Think of the interest the state makes on millions and millions of dollars in income tax for that extra year until they disperse the money to the cities. 

There are no certain figures for expenses within the General Fund budget for this year as we are in the process of crafting this year’s budget. In last year’s Fiscal 2016-17 General Fund budget, here were the areas of expense:

  • Police department                   43%
  • Fire department                      22%
  • Other                                     16%
  • Non-departmental                     9%
  • Public Facilities, Rec & Events     6%
  • Public Works                             4%

Note that 65% of the city’s money goes to pay for Police and Fire. When you see the city’s total budget of approximately $500 million remember that only a portion of that is the General Fund Budget (should be an estimated $200 million).  The remainder (an estimated $300 million) is either Enterprise Funds or other special funds, such as the dedicated public safety sales tax or the transportation sales tax and as dedicated funds, cannot be used for any other purpose, such as the General Fund.

Out of a General Fund budget of approx. $200 million, 65% or approx. $130 million is for Public Safety (Police and Fire). That leaves about $70 million in the General Fund to pay for operating expenses (examples: all other employees’ salaries and benefits; our debt payments and our Capital Improvement Plan). Over half of the remaining $70 million (approx. $45 million a year) goes to pay the city’s debt service. That leaves us with an annual General Fund budget of $25 million a year.

As you can see, the city’s annual budget and the processes to create it are pretty complicated. It’s all in the numbers and a basic understanding of what numbers go where.

In Part 2 of Glendale’s budget 101 we will look at the proposed Capital Improvement Program or CIP. This is the budget portion that will be discussed by city council on Tuesday, March 21, 2017 at its 9 AM workshop. This will be televised live on Cox’s cable channel 11.

© Joyce Clark, 2017                 

FAIR USE NOTICE

This site contains copyrighted material the use of which is in accordance with Title 17 U.S. C., Section 107. The ‘fair use’ of any such copyrighted material as provided for in Section 107 of the US Copyright Law and who have expressed a prior interest in receiving the included information for research and educational purposes. For more information material on this site is distributed without profit to those who have not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of environmental, political, human rights, economic, democratic, scientific and social justice issues, etc. We believe this constitutes a ‘fair use’ of any such material. For more information go to http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use,’ you must obtain permission from the copyright owner.

Disclaimer: The comments in this blog are my personal opinion and may or may not reflect an adopted position of the city of Glendale and its city council.

Whew, It’s been a rough two weeks (since April 5th) with my blog site being down. My thanks to all of you who have patiently waited for its resurrection. I did lose some posts that occurred between March 11, 2017 and today. Thanks to the Word Press team and especially my genious grandson (majoring in IT) for solving the Gordion Knot of computer software enabling me to post once again. I know I will be throwing some money in my Grandson’s direction for saving my site.

What’s been happening in the meantime? On Tuesday, April 4, 2017 city council had another Budget Workshop meeting. Mostly it reaffirmed suggestions made by council at the previous budget workshop. One of my “asks” at the previous workshop was to consider moving up the proposal to transition the city’s street light system city-wide to LED lighting. This project would result in cost savings to the city of a half million dollars a year that could be redirected to providing greater dollar capacity to repair and maintain even more city streets annually. Council was presented further information and approved moving the project forward in the coming Fiscal Year rather than waiting until Fiscal Year 2023.

I was also successful in getting Heroes Park and O’Neal Pool back into the Capital Improvement Program. This is but a first step. If these items are not even listed in the CIP, it is impossible to secure funding for them.

Previously I had asked for consideration of returning funding to an upgrade of Pasadena Park that was pulled in favor of a new project, construction of a bike path at Foothills Park. I pointed out that council identified priorities were to maintain and improve existing assets before creating new projects. At that time Councilmember Lauren Tolmachoff seemed to agree with that premise and was amenable to removing the new bike path project. On the April 4th budget meeting she seems to have reversed her position and now is reluctant to give up this new project. As many residents down our way are fond of saying quite often to me, “Them that has, gets more. Them that has nothing, gets nothing.”

The next several council budget workshops will deal with individual departments and their budgets. I am sure I will have questions…lots of questions. That’s one good aspect of having 16 years worth of historical memory…it helps me to identify in which areas of the city to take a good, long look.

On Friday, April 7th, I went down to the studios of Channel 3 TV for the taping of a segment for a show called Politics Unplugged. Here is a link:  https://www.youtube.com/watch?v=PTAoX-SiS6Y&feature=youtu.be . The segment was about local fire unions’ influence in elections and followed on the heels of an Arizona Republic story on the same topic. Here is the link to the Arizona Republic article: http://www.azcentral.com/story/news/local/arizona-investigations/2017/03/28/arizona-firefighter-unions-donated-hundreds-thousands-local-elections/99603914/ .

There are a few more events about which I would like you to be aware. One is a neighborhood public meeting to learn about a proposed residential project to be sited at the southeast corner of 83rd Avenue and Northern Avenue. It will be on Thursday, April 13, 2017 at 6 PM at the Harvest Church, 8340 W. Northern Avenue. The applicant is seeking to place 50+ homes on 6,000 square foot lots…ugh.

On Thursday, April 20, 2017 at 6 PM I will be hosting another Yucca district meeting at the Coyote Ridge Elementary School Cafeteria, 7677 W. Bethany Home Road. Residents will have an opportunity to meet and to hear from our new City Manager, Kevin Phelps, and our new Police Chief, Richard St. John. They will stay for the entire meeting so that residents may introduce themselves and ask questions.

After those two speakers, there will be an informal meeting of the Parks & Recreation Board and the Library Advisory Board for the purpose of hearing a presentation from the Dick & Fritche architectural firm on a proposed design concept for our West Branch Library.

Following that presentation, as is normal for my district meetings, I will open the floor for residents to comment on the proposed library or any other topic. At the end of the formal meeting, please take the time to meet our City Manager and Police Chief.

© Joyce Clark, 2017               

FAIR USE NOTICE

This site contains copyrighted material the use of which is in accordance with Title 17 U.S. C., Section 107. The ‘fair use’ of any such copyrighted material as provided for in Section 107 of the US Copyright Law and who have expressed a prior interest in receiving the included information for research and educational purposes. For more information material on this site is distributed without profit to those who have not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of environmental, political, human rights, economic, democratic, scientific and social justice issues, etc. We believe this constitutes a ‘fair use’ of any such material. For more information go to http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use,’ you must obtain permission from the copyright owner.

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