It has been 17 years and 96 days since the city’s pledge to build the West Branch Library.

On March 25, 2015 the Glendale Star ran a story on the elimination of the city’s General Fund debt payable to the city’s Enterprise Funds (water, sewer, sanitation and landfill). Here is the link:  http://www.glendalestar.com/news/article_4fd7f4dc-d181-11e4-b56b-93c81bbb5cc5.html .

In an effort to buy additional time to secure a buyer for the NHL Coyotes who would pledge to keep the team at Glendale’s Gila River Arena, a previous city council approved borrowing $15 million from the city’s water and sewer funds, $40 million from its landfill fund and $5 million from its sanitation fund. The revenue was used to pay the NHL to manage the arena for two years while the process of finding a team buyer continued. At the time council also approved a repayment plan, using General Fund revenue to pay the Enterprise Funds back with interest. It was a solemn pledge and a commitment that the previous council never anticipated future councils would renege upon. The unthinkable is about to occur. At a recent workshop following the recommendation of Tom Duensing, Glendale’s Finance Director, a majority of council plans to do exactly that.

When Councilmember Tolmachoff asked what would be the consequences of such an action, Duensing replied, “You could do it a number of ways: you could do rate increases, you could defer maintenance, you could cut your operating costs.”

There were questions unasked that still demand answers:

  • While this action might make the general fund balance sheet look better, what impact does it have on the balance sheets of water and sewer, the landfill, and sanitation?
  • By recording the former “loan” to a fund transfer, doesn’t it reduce the assets on the balance sheets of those funds?
  • How does the reduction in financial assets impact the bond ratings of the water and sewer fund and the landfill fund?  While the proposed action may assist in the General Fund bond rating, doesn’t the converse action harm the Enterprise Funds ratings?
  • Doesn’t this action reduce the funds available to water and sewer for maintaining and upgrading the water and sewer systems? Duensing in his answer to Tolmachoff implies that it does.
  • If the Council approves this action, doesn’t that mean that a water and sewer rate increase will be necessary and supported by the Council? If a rate increase occurs, it looks like we can lay the evaporation of a pledge to repay the Enterprise Funds at the feet of retaining the hockey team as an anchor tenant at the city owned arena.

Duensing’s proposal is moving the pea underneath a different shell. It’s a magical, accounting trick designed to satisfy the rating agencies. The problem is that it sets precedent. Who, whether it’s a developer, a citizen or a company doing business with the city, will trust in the city’s word if it is willing to renege on paying a debt? If a water, sewer or landfill rate increase is proposed and adopted by this city council citizens will have every right to be angry for it will be driven by a broken promise to reimburse the Enterprise Funds. Glendale rate payers of the water, sewer, landfill and sanitation services will have every right to assume that any proposed rate increase is driven by money borrowed from these funds and paid to the NHL to run the arena for two years.

Duensing appears obsessed on building up the city’s reserve funds (contingency). While building the city’s reserve back up is necessary and critical his solutions are to keep the sales tax increase permanent and now, to raise Glendale’s property tax rate by 2%. He appears to have only two tricks in his bag.

Sterling Fluharty of the Glendale Star in writing an article entitled City decides not to cut taxes, in its online edition of April 6, 2015, reports, “Glendale City Council had few objections two weeks ago when the acting city manager and financial director announced they were abandoning plans to lower the sales tax rate and making preparations for raising property taxes.” Here is the link: http://www.glendalestar.com/news/article_b6c5e5e6-dc99-11e4-8961-4fb07a583a64.html#.VSNVhK1dGb8.twitter .

Last December Duensing was still pitching lowering the sales tax rate. Fluharty in his article states,  “Duensing published a five-year financial forecast that month (December, 2014) that assumed the council would approve annual reductions, making the sales tax rate 2.85 percent in 2015-16, 2.825 percent in 2016-17, 2.8 percent in 2017-18 and 2.775 percent in 2019-20.” What information does senior management and the council have (not shared publicly) to cause them to not only reject a reduction in the sales tax rate but now to increase the property tax rate?

Since the new council was seated in January, 2012, adopting Duensing’s recommendations it has:

  • Made the increase of 2.9% as a temporary sales tax increase permanent
  • Approved a management agreement paying IceArizona $15 million a year
  • Will approve construction of a parking garage at Westgate for $46 million + over 3 years
  • Will approve a 2% increase in property taxes

Where is the council commitment to cut expenses and to live within the city’s means? It seems their only solutions to solving the city’s ongoing financial problems is to keep the increased sales tax rate and now to raise the property tax rate.

Over the next 3 years the General Fund will have to absorb an additional $46 million plus as brand new debt. That figure does not include the ongoing debt for the baseball park, the Westgate Media Center and is parking garage, the Westgate Convention Center, the annual $15 million payment to IceArizona and the construction debt on the arena and the Public Safety Training Facility…as well as other debt I have failed to include.

During council’s discussion of a property tax increse while the sales tax increase does not diminish Mayor Weiers said, “At least we’re giving our citizens something, certainly in the right direction, anyway.” What exactly are the Mayor and council giving to its citizens? A screwing? It appears the right direction for Mayor Weiers and this city council is to raise yet another tax.

©Joyce Clark, 2015

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