On the morning of January 21, 2014 council began its first foray into budget discussions. Senior management consists of City Manager Brenda Fischer, who has been employed in Glendale for about 7 months; and Executive Director of Finance, Tom Duensing, whose time in Glendale is even less – about 4 months. Obviously there is little to no historical memory and that is not helpful. Did you notice that many strategy suggestions for addressing Glendale’s financial situation have been already used? There was nothing innovative or creative about the budget presentation made. Why? As Duensing said, “Glendale spends more than it brings in.”

For those who are interested in what’s happening to our money here is the schedule of upcoming budget workshops:

  • February 4     9 AM to noon
  • February 18   9 AM to noon
  • March 18       9 AM to noon
  • March 25       1:30 PM to 4:30 PM
  • April 8           9 AM to 5 PM
  • April 10         9 AM to 5 PM

There was a series of slides in this presentation and they can be found here: http://www.glendaleaz.com/Clerk/agendasandminutes/documents/012114BudgetWorkshop.pdf .

Where does your money go?

  • Personnel costs = 55% to 60%;
  • Supplies, Services and Capital Outlay = 15% to 20%;
  • Contractual Expenses = 20%;
  • and Contingency = 5%.

These are not hard percentages and Mr. Duensing did not have them available for the presentation.

What can be done about the debt? Apparently not much. There are no options available on the city’s debt payments for they were restructured in 2012. $10 million in capital lease payments could be prepaid if Glendale had the money to do so. The only suggestion to council and accepted by them was to make the interest rate on inter-fund loans variable rate. If you remember, $45 million was borrowed from the Landfill, Sanitation, Water& Sewer, IT Replacement and Vehicle Replacement Funds to cover $50 million paid to the NHL over 2 years to keep the arena open until a buyer for the team was found. Duensing said that by changing the interest rate paid back to these funds to a variable rate the General Fund will save $1.4 million the first year declining to $938,857 by the sixth year.

As for the city’s contingency fund, expediency ruled. Instead of council policy of reserving 10% of the General Fund it was reduced to 5% of the General Fund with no dissent from anyone on council.

Question. Why did no one ask for a historical look at the amount spent from Contingency over the last ten years? Instead of blindly accepting a subjective percentage it might have been better to peg the amount needed for the General Fund Contingency to a dollar figure. Maybe it’s only $2M a year or $4M a year. But, sadly, no one asked.

OK, dealing with the city’s debt will average an expenditure savings of approximately $1 million a year. That’s a far cry from the $17 million shortage projected for next fiscal year. That led council to look at other expenditure reductions in the form of alternate service delivery (read privatization). Keep in mind, Glendale employees, that every privatization of a servics comes at a cost…employee layoffs. Here’s a list of services under consideration:

  • Transit
  • Custodial
  • Parks & Median Maintenance
  • Libraries
  • Public Relations/Special Events
  • Web Site Management
  • Streets/Sweeping/Signals/Intersection Repair
  • Security
  • Recruitments
  • Sanitation
  • Landfill
  • Fleet Maintenance
  • Recreation/Civic Center Management
  • IT Applications Support
  • Payroll Processing
  • Risk Management
  • Plans Review
  • Arts
  • Training
  • Building Inspection
  • Engineering Review
  • IT Infrastructure Support
  • Business Licensing
  • Sales Tax Auditing
  • Glendale TV Channel 11
  • Cemetery
  • Facilities Management
  • Benefit Administration

Council was told that it will take some time to bring recommendations from senior staff back as to which of this smorgasbord of services will become a candidate for oblivion. There was council unaniminity on moving forward with this proposal. Even Councilmembers Hugh and Alvarez agreed to take a further look at the future staff proposals.

If expenditures are difficult to nonexistent to reduce then the next strategy is raising revenues. The euphemism for it is “revenue enhancements.” There are only 4 sources of income for the city:

  • local taxes = 52%;
  • State-Shared Revenue = 31%;
  • Fees, Licenses & Permits = 9%;
  • and “Other” = 8%. Typically, no one on council asked what the “other” consisted of.

Council had already approved increasing the Primary Property Tax Rate by 2% and they were asked to ratify their decision. They did unanimously. They cannot raise the Secondary Property Tax Rate because it currently satisfies the debt service on General Obligation Bonds. In other words they would not be able to make a case for that increase…Thank God.

That leaves the elephant in the room…the temporary sales tax increase. A majority of this council will make the temporary sales tax permanent and may even increase it. Each tenth of a percent earns the city an additional $3.4 million annually. Only Councilmembers Hugh and Alvarez demurred and wanted it to go to the voters.

There is a major question that no one on council asked…Why now? The temporary sales tax increase does not expire until June 31, 2017. There are several years to make this kind of decision. Oh, but if they wait until 2016, for instance, it will become the hot topic of the mayoral election of 2016. Kinda crass and cycnical…oops…it’s just politics.

After an hour and a half of presentation by senior staff and virtually no questions (there were a few but not meaningfully relevant) council agreed to:

  • change to a variable interest rate on interfund loans;
  • contingency was reduced to 5%;
  • council will adopt some form of privatization of service delivery which could result in employee layoffs;
  • your Primary Property Tax will increase by 2%;
  • and the temporary sales tax will become permanent and may even increase.

Merry Christmas and Happy New Year, Glendale residents…you just received your long overdue Christmas presents.

© Joyce Clark, 2014


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