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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.

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.

On Tuesday, October 18, 2016 the city council had only one item on its workshop agenda…the performance of its Civic Center. The Civic Center opened in 1999 and is now 17 years old. It is a beautiful building. Former Mayor Scruggs wanted it and sold it under the guise of becoming a destination location in downtown Glendale. Has this facility performed up to its expectations? Let’s take a look.

City personnel made their Tuesday presentation based on figures for the last 5 years of the Civic Center’s operation. I have taken staff’s 5 year average and derived estimates that reflect the entire 17 years of its operation. My figures could be a little too high or a little too low as I did not look up the figures in 17 years of budget books. Hence the estimated were arrived at by multiplying the average annual figures times 17 years.

Over the 17 year life of the facility the General Fund Budget allocation was an estimated $11,422,000.00 and there had been an additional General Fund Subsidy over those 17 years of another $4,400,000. The 17 year total of budget allocations and subsidies is an estimated $15,822,000 or an average of $930,000.00 per year. Not included in this amount are the costs of maintenance and repair that have been expended over the 17 year period as staff did not provide any figures relative to this expense.

What kind of revenue does the Civic Center generate to offset its expenses? Over 17 years an estimated $850,000 had been earned from the catering contract and during the same period the Civic Center had earned an additional $6,800,000.  The total estimated revenues over the 17 year period is approximately $7,650,000.

The Civic Center had earned an estimated $7,650,000 over its life span and had cost the city an estimated $15,822,000. It has cost the city an estimated $8,172,000 to keep the doors of the Civic Center open for the past 17 years.

According to the staff presentation over the last 5 years the Civic Center had drawn an annual average of 51,888 patrons or for the past 17 years an estimated total of 882,096 patrons. That averages about 141 patrons per day. However, there are days when the Civic Center has no business and days when it is booked for large gatherings. It should be mentioned that the Center has very little, if any business, in December due to Glendale Glitters. There simply is not enough parking during that period for Civic Center patrons and over the years patrons have not wanted to deal with the traffic generated by Glendale Glitters.

Has this facility fulfilled its promise? Everyone, even staff, says no.  In their presentation staff offered a plan with a new growth goal of an increase of 5% in patronage per year. Since the average annual patronage is 51,888 patrons, their goal is to increase that number by 2, 594 additional patrons this year. They believe they can accomplish that goal because new funding has been allocated to market the Center; there will be enhanced collaboration with the Glendale Convention and Visitor’s Bureau; their absorption into a new department will create new synergy; and there will be an enhanced building maintenance and repair fund. Staff has also asked for authorization for up to 6 community events at no charge; consideration of rental fee adjustments as part of the Fiscal Year 2017-18 budget; and the flexibility to negotiate rental fee packages.

Will all of this work? Everyone hopes so. The jury is still out. City council is willing to give the Center more time.  Staff’s first annual performance report is due in a year. Make no mistake. Challenges remain. Not having a major hotel nearby as well as inadequate parking space during downtown events will have to be overcome, if possible. Add to this equation the Convention Center space owned by the city and managed by the Renaissance Hotel at Westgate is a direct competitor for the same business.

If staff cannot turn the Civic Center around then it may be time for council to consider whether it will ever meet its purpose financially and philosophically. Perhaps repurposing will become its fate. It was originally designed to be a draw for downtown Glendale. A true destination place is exactly what downtown Glendale desperately needs to become more robust and to grow to its potential.

© Joyce Clark, 2016          

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.

This is the proposed casino’s reality. Fort McDowell Casino isFort McDowel prime-rib 2 currently running ads that offer Prime Rib on Tuesdays for $6.99 and Crab Legs on Wednesdays and Thursdays for $7.99. It’s not possible for a Yard House, Gordon Biersch, McFadden’s or Saddle Ranch Chop House at Westgate to offer these prices.

Fort McDowell prime rib July 2014You will not see prices like these at the Westgate restaurants for very good reasons: sales tax and regulatory costs. You see, these restaurants have to collect federal, state, county and Glendale sales tax. The Glendale portion of the restaurant sales tax is 3.9%. When state and county taxes are added the total rate is 11.2%.What sales tax does the proposed Tohono O’odham casino with its planned restaurants pay? Nada…zip…nothing.

The icing on the cake is that the Glendale city council just voted to make the temporary sales tax increase permanent…just another stake in the hearts of these restaurants.

Add to the unlevel playing field of all kinds of taxes paid by businesses in Westgate the myriad of federal, state and local regulations with which these businesses must comply. It eats into Westgate businesses’ profits to do so. As a sovereign nation the TO is not required to comply with federal, state, county or local regulations. What regulatory costs does the proposed Tohono O’odham casino bear? Nada…zip…nothing.

TV Channel 5 weekly runs a “Dirty Dining” segment with recent results of inspections of restaurants in Maricopa County. Have you ever seen a Tribal restaurant inspection review? Of course not. Tribal reservations are not subject to these kinds of inspections. They are not subject to federal (OSHA), state, county or local health, safety and welfare regulations because they are a reservation and have sovereign immunity…consider the reservation as a foreign country planted within Glendale. A call placed to the Maricopa County Department of Environmental Services revealed that it has no jurisdiction over tribal restaurants and the Indian tribes regulate themselves. What regulations are there to protect the health, safety and welfare of the casino’s workers and patrons? Nada…zip…nothing.

What do you bet one of the very first elements the Tohono O’odham (TO) will build is paved parking lots. Why, you ask? So they can undercut parking prices for Cardinals games, hockey games and other non-sporting events held at Glendale’s arena, less than a mile away. Is there anything that can prevent the TO from offering cheap parking? Nada…zip…nothing.

I can see it now…shuttle busses packed to the gills disgorging seniors coming from the Sun Cities and Youngtown, spending their time playing bingo and the slots, then partaking of a buffet lunch or dinner before being whisked back to whence they came, never seeing the light of day at Westgate or Tanger Outlets.

Recently I received over the Indian gaming transom some  reliable estimates of what the proposed TO casino is projected to earn in revenue. The numbers are astounding. The numbers offered are not carved in stone but are reasonable estimates provided by people who would know within the industry. Estimates provided are that a new casino in Glendale would earn between six hundred million dollars and seven hundred million dollars a year in gross revenue.

It is estimated that the Tohono O’odham’s net will be half that amount (50%) or three hundred to three hundred and fifty million dollars a year. The net amount reflects the subtraction of all costs associated with O&M as well as an amount of 1% to 8% of the tribe’s gross gaming revenue to the state. To put that in some kind of perspective, it is estimated the TO will net a million dollars a day. Think about that…a million dollars a day.

Which leads to the question of why do the 32,000 members of the TO Nation average an income of $8,000 a year as Chairman Norris testified, under oath, before the Senate Committee on Indian Affairs this past week, “Most of our reservation land is located in remote isolated areas and our population is one of the poorest in the United States with average individual incomes of just over $8000.” The Tohono O’odham have 3 casinos operating in southern Arizona. Their website says, “The Desert Diamond Casino, owned and operated by the Tohono O’odham Nation, provides three exciting entertainment venues in Southern Arizona: Desert Diamond Casino (Nogales Highway), Desert Diamond Casino (I-19 & Pima Mine Rd) and Golden Ha:san Casino (Why, AZ).” It goes on to say, “The mission of the casinos is to provide the means for a better quality of life for Tohono O’odham Nation and all people in Southern Arizona.” If the TO are netting even a portion of these revenue estimates from its three southern Arizona casinos, why is part of the net not distributed to the Nation’s members by the Tribal leadership to reduce the poverty rates of its 32,000 members?        

It is widely known that 4 Glendale councilmembers directed staff to negotiate with the Tohono O’odham and the results will be discussed at their August 5, 2014 workshop. Rumor has it that the city council has negotiated something in the neighborhood of $100,000 from the TO. That’s got to be a joke. If it turns out to be true, once again, Glendale’s city council will get snookered…this time by the TO…all the while congratulating staff for their work and patting themselves on the back.

They should demand…not ask…demand a 5% payment of the Tohono O’odham’s annual net revenue earned by all of the development placed on that site. It has a nice ring to it, doesn’t it? What does 5% equal? How about $15,000,000 a year? Doesn’t that number sound familiar? It’s the same amount the city must pay annually to IceArizona under the management agreement. It would certainly go a long way to relieving the tremendous financial pressure the city faces annually as a result of that payment to IceArizona.

Are Glendale residents willing to sell their souls and bear yet another financial burden for not only a token payment but for the TO’s highly inflated numbers of temporary construction jobs and low-paying service industry jobs? Is this city council while pandering to a small number of extremely vocal residents that desperate and gullible? Is this the best that we can expect from our city council?

© Joyce Clark, 2014

FAIR USE NOTICE

This site contains copyrighted material the use of which is in accordance with Title 17 U.S. C., Section 107. The 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 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 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.

This is always a difficult subject because of all of the facts and figures that are presented. The numbers can be confusing to those readers who have not followed my other blogs on the monthly reports. Here is a link to the report:http://www.glendaleaz.com/finance/documents/FY14MonthlyArenaReport-20140430.pdf . Here is the report itself:

April 2014 MonthlyArenaReport 

This monthly report publicly released by Glendale will reflect the last of the hockey games for this season but does not capture the supplemental ticket surcharge which is due and payable 60 days after each fiscal year. The new fiscal year begins July 1, 2014 so this line item would not be paid to the city or reflected in this report until September 1, 2014.

The Interest Income-Escrow Account still sits at $4,620 and has not been updated since the first monthly report.

The agreement revenues to the city to date total $4,686,412 and reflect a prorated 11 month fiscal year begun on August 5, 2013. The total city expenditures to date are $10,252,055. In this first year all figures are prorated. The total management fee the city will pay is $13,750,000 and total capital improvement expenditures are $450,685.   The report reflects a loss to the city, to date, of $5,565,643.

For purposes of discussion let’s include as revenue the supplemental ticket surcharge. It comes in at $774,452. Let’s add that amount to the total qualified ticket revenue received by the city; and new ticket revenue figure is $2,323,357. The total management fee of $13,750,000 and capital expenditure requirement of $450,685 paid by the city this fiscal year is a total of $14,200,685. Subtract revenues received from fees paid and the loss to the City of Glendale in this fiscal year is the grand total of $11,877,328.

Consider this. Next fiscal year even if all 17,700 tickets per hockey game were qualified tickets the maximum amount the city would receive is $2,537,000 in qualified ticket revenue. For this exercise, let’s add to that figure another $1,268,500 in supplemental ticket surcharge. Add an additional million dollars more in parking revenues to the nearly $1 million generated this year and the maximum revenue 42/43 hockey games per season can generate is approximately $6 million.  

Global Spectrum and IceArizona would have to have approximately 100 revenue generating non-hockey events in order to earn an additional $9 million annually to be paid to the city to offset the $15,000,000 the city must pay as an annual management fee to IceArizona. They will be fortunate to host 25 non-hockey revenue generating events next year.

Some folks dismiss the $6 million portion of the annual management fee because it was already budgeted. It’s not to be dismissed because it’s in the budget. The money still comes from General Fund sales tax revenue. It still counts. It is still money the city has to receive from sales tax revenue to pay all required arena expenditures. 

I added the Supplemental Ticket surcharge to the total revenues to be received by the city. Even with that “enhanced revenue,” the fact remains that this year the city’s loss is $11.8 million dollars. There is no more money forthcoming to the city from any magical or secret source.

For purposes of this exercise, here is how this year and the next 4 fiscal years worth of loss to the city may very well pencil out. For this exercise I reduce the annual loss by an estimated $2 million a year by increasing revenue to the city by an equal amount annually:

  • This year, FY 13-14           loss of $11.8 million
  • Next year, FY 14-15          loss of $  9.8 million
  • Year 3, FY 15-16               loss of $  7.8 million
  • Year 4, FY 16-17               loss of $  5.8 million
  • Year 5, FY 17-18               loss of $  3.8 million
  • 5 Fiscal Years                   Total loss of $39 million

Add to the $39 million deficit in earned revenues approximately $12 million a year in construction bond debt for a total of $60 million. In five years I estimate the city will pay $99 million dollars between paying annual construction debt and covering annual revenue losses generated by the management fee.

My disclaimer is that these estimates are my best, educated guess based upon the numbers that are publicly available. The actual loss number for five years could be higher or lower than estimated.

What is ironic about this IceArizona contract is that the “enhanced revenues” (with the exception of naming rights and the supplemental ticket surcharge) are not really new revenue. Before IceArizona and the NHL’s two years of management, the city paid no annual management fee…none…nada. Yet it collected the very same revenues — a ticket surcharge and a parking surcharge. They were included in the price of every ticket. Those revenues: sales tax earned inside the arena and the ticket/parking surcharges were used to pay down the construction bond debt because the city didn’t have to also pay a management fee.

With this new deal the management fee consumes all of ticket/parking surcharge revenues (in addition to the other revenues like naming rights) the city was already getting and leaves the city struggling to cover some portion of the $15 million deficit every year. Oh, and don’t forget, IceArizona takes $20,000 off the top of parking fees for every game. That comes to $860,000 this year.

Another irony is that when IceArizona took over, it didn’t subtract the existent ticket and parking surcharges that were historically already included in the price of the ticket. Those charges were absorbed and became part of the base price of the new IceArizona tickets to which they added the new, qualified ticket surcharge. In essence, every fan’s ticket now includes the old ticket and parking surcharges within the base price and the new IceArizona ticket surcharge is then added.

The management agreement was and is good for IceArizona but it’s not so good for Glendale. Earned revenues once applied to the construction bond debt are now used to cover the $15 million annual management fee. Those earned revenues simply are not adequate to cover the management fee.

The argument for keeping the Coyotes as an anchor tenant was to benefit all of the surrounding businesses in Westgate. With the totality of Glendale’s excessive debt burden the question must be, is it worth it to keep the team and struggle to pay the annual management fee? Or is Glendale better off going back to accepting one of the Beacon bids solicited last year? You decide.

© Joyce Clark,

2014 FAIR USE NOTICE

This site contains copyrighted material the use of which is in accordance with Title 17 U.S. C., Section 107. The 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 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 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.

The Glendale Monthly Arena Report for February, 2014 is now available. The $3 qualified ticket surcharge for hockey events is reported by IceArizona at $163,082. Divide that number by the $3 ticket surcharge and the qualified ticket attendance for the month is 54,360. The number of hockey events for the month was 4. Divide the 54,360 by 4 and the average qualified ticket attendance per game is 13,590. The publicly announced attendance figures are higher. If a game was sold out at 17,750 that means that approximately 4,000 tickets would be non-qualified, either comped or sold at a discounted price and the city does not receive the surcharge.

IceArizona, by comping and selling discounted tickets, is not generating the revenue it needs. Publicly they have announced that some of the games are the highest revenue generators to date. True enough but if they had sold more qualified tickets their bottom line would be stronger. How long before its losses reach the $50 million figure? Five years? Three years?

Let’s look at the non-hockey events. There were two in the month of February. The qualified ticket surcharge reported by IceArizona to the city is $59,884. Divide that figure by $5 per qualified ticket for a qualified ticket attendance of 11,976. Divide that figure by the 2 non-hockey events and there was an average of 5,988 of qualified ticket attendance per event. Again, the publicly announced attendance figures were higher but again, the balance of the tickets were either comped or sold at a discount, making them non-qualified ticket sales.

Parking figures are only reported by quarters of the year so the next parking revenue statement will be available at the end of April, 2014. The city continues to show a total loss of slightly over $3 million to date.

As has been reported, council budgeted $6 million in this Fiscal Year toward the payment of the $15 million annual management fee. The council meeting of March 25, 2014 will have council voting to transfer $6,680,160 from its Contingency account to cover the balance of the arena management fee due this year. The total management fee for this year is $13,551,370. It is not the full $15 million because the management deal did not become effective until August, 2013. The lower management fee for this year reflects the proration starting date in August. The city pays out $13.5 million and receives $3.2 million in “enhanced revenues” (that includes sales tax inside the arena) to date.  It looks like the city’s arena loss to date is about $10 million. This figure will drop with the reporting of revenues from the games played in March and April. Hopefully there will be some playoff game revenue as well. It is estimated that the city’s loss for the year will be in the $7 million range. Couple that with the $12 million annual arena construction debt payment. It isn’t a pretty picture, is it?

© Joyce Clark, 2014

FAIR USE NOTICE

This site contains copyrighted material the use of which is in accordance with Title 17 U.S. C., Section 107. The 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 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 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.

Caitlin McGlade has an article in the January 25, 2014 edition of the Arizona Republic. The information she provided is old news – stale. Must be a slow news day and therefore a good day to bash Glendale again. I would imagine Coyotes fans are in a dither while Glendale’s citizens are just shaking their heads. There is no need to become hysterical – just yet.

The information used has been up on the Glendale website for quite some time and the numbers have not changed. Do not expect to see any new numbers until after January 31, 2014 when the December 2013 Arena Monthly Report and the first quarterly (Oct-Nov-Dec 2013) parking revenue numbers will be posted. Here are the numbers as they are presented on the city’s website today:   

  Fund ID     Amount  
Arena Event Operations

$247,457.06

Arena Special Revenue

$1,947,103.03

   
Account

Amount

Arena Annual   Rent

$326,712.33

Arena Base Team   Fees

$48,681.51

Arena Naming   Right Revenue

$60,000.00

Arena Parking   Fees

$18,835.49

Arena Parking   Rev-Hockey Games

$309,898.94

Arena Parking   Rev-NonHockey

$91,719.49

Arena Ticket   Surchg-Hockey

$896,393.39

Arena Ticket   Surchg-NonHockey

$194,861.88

No where could I find what the city has spent to date in capital improvements to the arena. I am sure the numbers are there — somewhere. It may be labeled as Arena Event Operations although that may be the costs of providing public safety or it could be the first quarterly payment of the capital improvement bill. It’s hard to tell.

The picture as it stands today is incomplete and no one will have a good idea of revenues and expenses until after the end of the current Fiscal Year, June 30, 2014. If the current trend holds it will not be a pretty picture for Glendale’s financial health.

Glendale must pay IceArizona $15 million dollars a year for arena management. It is smoke and mirrors. IceArizona has assigned its entire rights over to Fortress Lending and the National Hockey League and that $15M is the payment on the interest on the loans it has with both entities. IceArizona has become a “pass through” for the $15M. In this current Fiscal Year the council budgeted $6 million toward the arena management fee. The remaining $9 million to cover the management fee is to come from “enhanced revenues” produced by IceArizona. As you can see it doesn’t appear that IceArizona will produce the much needed $9 million. What about the supplemental ticket surcharge of $1.50? It appears that it will come in under $1 million for the Fiscal Year.

Under a generous scenario it looks like this:

  •      $15 million to be paid each year to IceArizona for management of arena
  •    -$  6 million in city budget to pay management fee  
  •      $ 9 million not in city budget to pay management fee
  •     -$ 4 million received from IceArizona as “enhanced revenue” (approx. estimate)
  •     -$ 1 million received from IceArizona from supplemental ticket surcharge (approx. estimate)
  •     $  4 million shortage of revenues not covered by city budget or receipt of revenues from IceArizona (approx. estimate)

These figures are estimates and we will have to wait until the final numbers are available. The estimated $4M shortage could end up being lower or higher. Where will the payment of the shortage come from? There is only one place – the city’s Contingency Fund (rainy day fund). No wonder there will be little to no money in Contingency this Fiscal Year (the year end estimate is approx. $800,000).

Two other financial debts associated with the arena are the construction bond payments of approx. $12 million a year and the obligation of the city to pay for capital improvements to the arena. This year it is a million dollars and in the next few following years it is half a million. Then it cycles up to a million followed by another couple of years at half a million. 

Immediately some will point to Camelback Ranch as the 800lb. gorilla and it is. Keep in mind that the city does not have to pay annual operating and maintenance costs for the facility. They are paid by the two teams: the Dodgers and White Sox. What the city does pay in the construction bond debt annually and that too, is a substantial payment of approximately $13 million. The sales tax generated which is very small in the scheme of things does go toward the bond debt. The only light at the end of this tunnel is that in the future, way in the future, the Arizona Sports and Tourism Authority (AZSTA) has an obligation to reimburse Glendale for approximately 70% of the cost of constructing the facility.  In the meantime, it is another debt that Glendale can ill afford right now.

So, everyone take a deep breath, relax and wait until we have a complete picture of the numbers at the end of the Fiscal Year. 

There is a new poll to the left of this column asking if you believe that Glendale can straighten out its fiscal mess. To the upper right of this column you can sign up with your email address to subscribe to notifications of my upcoming blog post. Check them out!

© Joyce Clark, 2014

FAIR USE NOTICE

This site contains copyrighted material the use of which is in accordance with Title 17 U.S. C., Section 107. The 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 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 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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