Suppose you had a coat with many pockets…many, many pockets. You are allowed to put certain dollars into each pocket and you may spend, with ![bdu-4-pocket-khaki-tan-jacket-100-ripstop-cotton[1]](https://i0.wp.com/joyceclarkunfiltered.com/wp-content/uploads/2014/05/bdu-4-pocket-khaki-tan-jacket-100-ripstop-cotton1.jpg?ssl=1)
restrictions, for only one specific thing from any one pocket. It would be complicated and problematical, eh? Well, the coat is Glendale’s budget and each pocket has a specific purpose and restrictions. Why bother to learn about Glendale’s debt? There is no doubt that Glendale’s debt burden is at the root of its financial mess.
We’re going to look at the pockets that handle debt…all kinds of debt; Enterprise Fund debt, Highway User Revenue Fund (HURF) debt, Transportation Debt, General Obligation (G.O.) debt and Municipal Property Corporation (MPC) debt. All of the facts, figures and information came from public sources such as Glendale’s Budget Book for 2014 and other public, official Glendale documents.
Glendale’s total debt for Fiscal Year 2014 is $89,228,314 out of the total of all revenues received from all sources of $576,000,000. Roughly 15% of all revenue received by Glendale goes to pay off debt. 15% is way too high. It should be under 10%. These five categories constitute the major sources of Glendale’s debt burden:
- Enterprise Fund debt is $24,975,437……….28%
- MPC debt is $29,496,137………………………….33%
- G.O. Bond debt is $22,729,785………………..26%
- Transportation Debt is $7,331,080………….. 8%
- HURF debt is $4,695,875………………………… 6%
Let’s take the easier debt pockets first and get them out of the way.
In Pocket #1 is Enterprise Fund Debt of $24,975,437 – 28% of Glendale’s total debt. Water & Sewer Bonds are 27% of the city’s total debt and Landfill debt is another 1%.Enterprise Funds are water, sewer, sanitation and landfill. The Enterprise Funds were established by ordinance in 1986. Here is a portion of the text from the Sanitation Ordinance 1451: “The purpose of the sanitation fund is to accumulate all revenues and earnings received for sanitation services, to accumulate all interest earnings thereon, pay all administrative, operational and maintenance expenses, direct or indirect, of same, and accumulate contingency funds as an operational fund reserve to the sanitation fund. The sanitation fund shall be a separate and protected fund, to be used for no other purpose than expenses associated with sanitation services.” The other funds reflect the same language in their enabling ordinances. Note that these funds are protected and not to be used for anything else.
Enterprise Funds are accounted for in a manner similar to a private business. Enterprise funds are intended to be self-sufficient with all costs supported primarily by user fees. They are stand alone funds. Their revenue does not go into the city’s General Fund. What Glendale residents pay each month for city utility bills goes into these Enterprise Funds. When debt (in the form of bonds) are issued it is for infrastructure projects such as the new 91st Avenue Regional Wastewater Treatment Plant, the Cholla Water Treatment Plant, the replacement and repair of water lines throughout the city and treatment plant upgrades to meet new federal regulations. Landfill bonds will be used to close the south portion of the city landfill and to open up the north portion.
This debt is issued based on revenues received from customers for service. In an emergency the city could use secondary property tax revenue but by habit and practice, it has never done so. We know where the money comes from for this pocket and when we take it out we know the narrow, restricted uses for this money.
The next blog will look at Pocket #2, HURF and Transportation Bond debt. It’s an easy one as well. Understanding a city’s debt burden is as dry as dust but in order to arrive at solutions for dealing with Glendale’s debt, it needs to be understood. Once we get a handle on it, let’s see if there are any solutions to bring it under control.
If Enterprise Fund debt is still unclear to you or you have a question related to it, please offer your question as a comment at the end of this blog. I will do my best to answer it. That way everyone will be able to see the question and answer.
© Joyce Clark, 2014
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I think I know the answer but my question is …the departments named as Enterprise funds- water, sewer, sanitation and landfill have department budgets. Where does the funds for the employees and administration of those departments come from?
Generally, all operating and maintenance costs in those departments are paid for using revenues from customers with a few exceptions. The Public Works department (Right of Way, Field Operations, Engineering, Transportation and Airport) are paid from the General Fund. General Fund Transportation activities are things like signs and street light management. In Water Services, the General Fund covers environmental resource personnel, irrigation, customer service reps, meter maintenance and the personnel that staff various city water facilities.
Joyce,
Why is there enterprise fund debt? Is this one of the funds that money was removed from in order to pay the NHL?
There is Enterprise debt because no city can afford the cash needed to build a water treatment plant for example. Those facilities cost between $70 to $100 million. So a city bonds for such facilities. The last facility bonded for was a water treatment plant at approx. 75th Avenue and Grand Avenue.
And yes, the city borrowed money from the Water/Sewer, Landfill, Sanitation Enterprise funds to cover part of the two years of management fee payment to the NHL.
Looking forward to your perspective in GO and MPC bond debt. I am sure it will be interesting !!
Interesting isn’t the half of it. This series of blogs has been most difficult to write. Taking research and attempting to simplify the concepts has been difficult.