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Joyce Clark Unfiltered

For "the rest of the story"

It has been 18 years and 98 days since the city’s pledge to build the West Branch Library.

The reaction to the Tuesday, March 22, 2016 presidential primary in Arizona has been deafening and swift. Arizona’s long lines were a national story and an embarrassment as was the clearly unequal dispersement of polling locations throughout the county. Some areas ofI voted the county probably had too many polling locations while other areas of the county had none.

Greg Stanton, Phoenix’s mayor, has asked the U.S. Attorney to investigate. A petition is circulating asking the Obama administration’s Justice Department to investigate. Governor Doug Ducey weighed in calling for future open primaries that would allow all registered voters, no matter what party they belong to, to vote in a primary election. Even the State House Elections Committee is getting into the act and holding a hearing.

There’s plenty of blame to go around and all of it does not belong at the feet of Helen Purcell, Maricopa County Recorder. Don’t read this as Purcell being blameless for the buck stops at her office. She made poor decisions and bad recommendations to the County Board of Supervisors. She decided that there would be more mail-in ballots cast than walk-in votes. Wrong.  In February, upon the recommendation of Purcell, the Board approved only 60 locations from its usual number of 120. Purcell said cost concerns and the belief that a majority of ballots would be mail-in drove her recommendation. This is not the only election where an erroneous Purcell decision caused problems during an election. She won’t resign but it is time for her to go. Don’t worry; there will be plenty of candidates vying for her position at the next election.

Wait a minute…the Board of Supervisors did not have to accept her recommendation. Where was their due diligence? Certainly the Supervisors’ staff should have researched the issue before accepting her recommendation. Then there is the State Legislature and the Governor. budget 3They are not blameless either. The state legislature created a budget cutting funding used to conduct elections in all counties, including Maricopa County. County officials protested but no one in the legislature listened to them. Governor Ducey signed the state budget that included the reduced funding for county elections. Now the very same people who approved skimping on elections want Purcell’s head. People who live in political glass houses should not be throwing stones.

With all of the light on the situation be assured there will be more places than you can shake a stick at, for the General Election in November.

I promised to include comments I received from my blog readers about Tuesday’s election and I share them with you now:

DiNaslo

“Yesterday I was upset about the loooooooooong lines at Hope Chapel on 63rd Avenue in Glendale.

Today, after watching the news coverage last night, I am FURIOUS!

In the past, I’ve preferred to vote in person rather than use an Early Voting Ballot; I just like to go to my polling place, cast my ballot, and watch them put it in the machine. (I’ve never had too long a wait.)

Thinking this time would be no different, I didn’t request an Early Voting Ballot.

Unfortunately, I have developed a mobility problem that prevents me from standing for long periods of time, and there was no way I was going to be able to stand for 3+ hours in line waiting to vote!

Who would have thought there would be this HUGE fiasco?!

The evening news reported that Maricopa County cut the polling places from 200 (in 2012) to a mere 60 for this very important election!

The news also reported that at some (not all) of the polling places voters who had an Early Ballot, who simply wanted to drop it off, were not told they did not have to stand in the looooooong line. There should have been a volunteer outside (with a bull horn) telling people to go inside and drop off their ballot – but apparently that never happened! Why wasn’t this done? Utter lack of communication!

Not to mention Hope Chapel had only ONE bathroom to accommodate voters who needed to use the facility! Or other polling places running out of ballots!

UNBELIEVABLE!!

In a televised interview with Helen Purcell last night, she made some weak excuse about the reduced number of polling places, and also “blaming” the voter’s lack of information on the resultant loooooooong lines. How dare she!

This morning she stated she would not step down from her position, but I don’t think that should be her decision. She should be removed from her job, based on pure and simple Incompetence! She screwed up, she should pay the price – – as should any of her staff who were compliant in the decision to reduce the number of polling places to be made available to voters!

Sadly, Arizona has made the news – and not in a good way! Once again, we are made to look like a bunch of ignorant, uninformed fools – thanks to the leaders of this State.

You asked for my opinion, Joyce. Well, there you have it!”

Carpenter

“I couldn’t believe there were no polling places in south Glendale. I had an early ballot but when I realized my time frame, I just needed to drop my ballot. Rather than going 10 or 12 miles to the Glendale polling places, I chose to go to the 51st Avenue and Thomas polling place to just leave my ballot. I was shocked that the line went all the way around the building at 10:00 in the morning. I would never have been able to stand there that long. I know of two people for sure that could not take two or three hours to stand in line to cast their ballots. What poor planning for an area that constantly talks about wanting people to get out and vote. I remember years going to vote and my car would be the only one in the parking lot. Sure hope they get this mess worked out before the November election.”

Shelly Honn

“I would not have been able to stand in a 3 hour line having arthritis in both of my knees. I am very glad that I am also receive an early voting ballot. I think this state needs to seriously look at at least two things providing the ability to do online voting ONLY during a certain time frame (like from 7:00 to 10:00 p.m. when most people are home) and also putting more polling locations in those areas where it is likely for individuals will not have a way to vote online. This is a complete embarrassment for our state.

It is also an embarrassment to our great country that these 5 individuals are who we have to choose from to become president, its disgusting.”

Tom Traw

“jOYCE, My wife was unable to stand in line for three hours so she did not vote and expect hundreds or thousand of voters who wanted to vote were angry and went home. Helen should probably lose her job over this fiasco. No common sense whatsoever. Our typical politicians for you. I wonder if it was planned by one party or the other????”

The Truth!!

“I am a young person but to stand in line ruined my already marginal feet even more. I was amazed how many people hung in there to use their right to vote.”

© Joyce Clark, 2016

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Pocket #4 contains Municipal Property Corporation (MPC) Bond debt of $29,496,137. It totals 33% of Glendale’s debt for this year.  According to bdu-4-pocket-khaki-tan-jacket-100-ripstop-cotton[1]the latest Glendale Comprehensive Annual Financial Report (CAFR) of 2013, the overall total of MPC debt is $1,020,889,000.

So far we’ve examined the contents of three pockets: Pocket #1, Enterprise Fund debt; Pocket #2, HURF and Transportation Bond debt; and Pocket #3, G.O. Bond debt.  These revenues come from specific sources; either customer utility bills, or State Shared revenue, or a dedicated transportation sales tax or secondary property tax.

The uses of monies from Pockets #1 and #2 are regulated and can only be used for utilities, or streets or transportation projects. Pocket #3 is regulated as to the amount of money it may acquire but the stipulations for revenue use are very broad and leave room for council decisions that can be political.

As was identified in the last blog, the state had, by statute, limited the amount of G.O. Bond debt any city could issue. Two categories of G.O. bond debt were created, restricting the amount of bond issuance to two categories: one of 6% of assessed secondary property value and another of 20% of assessed secondary property value.

The Municipal Property Corporation, however, was born as a means by which any city can circumvent the state imposed G.O. debt restrictions and allow the issuance of more municipal debt. Cities throughout the state have created MPCs…from Sierra Vista to Surprise. The earliest reference I could find to Glendale’s MPC is December of 1985.

There is no comprehensive definition in Arizona’s Revised Statutes for an MPC. Generally all are 501(C) (3) s, commonly known as non-profits. The bonds they issue are repaid by a city’s General Fund’s excise (sales tax) revenue. Technically, the bonds issued by a municipal corporation are not considered debts of the city, according to the state revenue department. They are not constrained by the same revenue and expenditure limits as that of G.O. bonds by which cities must abide.

Bonds issued by an MPC are not a debt owed by a city. If they default, a city is not legally bound to pay them with its general tax revenues. But realistically a city does have to make sure the debt is repaid. A city could not allow its MPC’s bonds to default, especially if MPC debt created assets like a water system or an airport. Although it’s not the debt of a city and is a debt of the MPC, any city would be obligated to pay it.

Since there are no restrictions on the amount of MPC debt a city may issue, it’s an area that can quickly lead to financial trouble as it has in Glendale’s case. Glendale’s long held, council adopted policy on excise (sales tax) funded debtstates that debt service will not exceed 10% of the 5-year average of the General Fund Groups’ ongoing revenue.Glendale is not in compliance with its own 10% policy and hasn’t been for several years. The money that goes into this pocket is not enough to cover what has to be paid out of this pocket. There isn’t a pocket large enough to hold what Glendale needs to pay out of it.

These bogs were offered to provide a better understanding of Glendale’s debt structure — where the money comes from and how it is used. In the next two blogs we’ll explore the “why” of some debt that was issued and lastly, are there solutions to Glendale’s debt. The answers may not be pretty.

© 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.

As promised here is the rest of the story on the city council workshops held on March 18, 2014. The morning session was devoted to money – the budget, the medical benefits plan and an increase in fire staffing.

The General Fund budget discussion yielded some important gems of information. Staff, for the first time ever, used zero-based budgeting. It is a methodology for which I advocated for years. It’s about time.  There will be $15.5 million in expenditure reductions and revenue enhancements. Most of the reductions are of the smoke and mirror variety and reflect internal movement of monies. The only exception is that all departments will make cuts totaling $4.75 million. The lion’s share of those departmental cuts is the result of eliminating unfilled, vacant positions. This is a strategy that has been used before reluctantly.

When council got to departmental budget cuts Councilmembers Martinez and Knaack again asked the rest of council to return a portion of their council budgets to the General Fund as a signal that they were willing to absorb some of the same pain other departments were enduring. Vice Mayor Knaack again expressed her concern and displeasure about Councilmembers Alvarez’ and Hugh’s practice of giving the lion’s share of their council budgets to non-profits. Once again, Alvarez dug in her tiny toes and said she would give up nothing.

The big budget take away is this: Glendale residents will experience a 2% increase in their property tax rates and the temporary sales tax increase will now become permanent. For one reason only. As Tom Duensing, Executive Director of Finance said, “The level of contractual obligations (Jobing.com Arena and Camelback Ranch Ballpark) is unique to Glendale.” If not for these two major debt burdens, “Glendale’s financial picture would look very different.” He went on to say according to the major rating agencies a city’s debt burden should be under 10% and most are in the 8% range. Glendale’s debt service burden is in the 25% to 28% range. Translating it means that the reason your taxes are increasing or in the case of the temporary sales tax increase remaining, is because of the debt created by Jobing.com Arena and Camelback Ranch Ballpark. That has been the elephant in the room that no one wanted to acknowledge. Glendale staff finally has done so. When will your councilmembers finally admit that these two city-owned properties are the reason?

How did the council fall on this issue? Councilmembers Martinez, Knaack, Chavira and Sherwood (a majority) gave approval and direction to remove the sunset provision from the temporary sales tax increase thereby making it permanent and to increase Glendale’s portion of your property taxes by 2%. Councilmembers Alvarez and Hugh wanted the sales tax issue to go before Glendale voters and silently gave approval to the property tax increase. Mayor Weiers wanted an additional week to confer with major stakeholders in Glendale. He didn’t get it but we can presume that he supports the majority council action taken. The next budget workshops are scheduled for April 8 and April 10, 2014.

One perplexing comment made by Mr. Duensing was that WITHOUT the temporary sales tax increase the ending fund balance is ONLY a positive 10% in 2017. If this is correct, One would think a positive fund balance of 10% seems to negate the need to make the temporary sales tax permanent.

Another issue taken up was the medical benefits plan. Retirees can expect another substantial increase to their monthly medical insurance payments while current employees will see no increase. Jim Brown, Executive Director of Human Resources (weren’t they getting rid of “Executive Director” titles??), said there would be no increase to current employees but retirees are an unfunded liability causing the increase in their premiums.

The last issue was an increase in fire staffing of 15 fire fighters as a result of a SAFER grant. As with a COPS grant there is a sliding scale and the SAFER grant will cover the first two years of fire fighter salaries. After that, the city will absorb the costs. Chief Burdick said that with the addition of 15 fire fighter positions there should be a savings of an estimated $400,000 in overtime pay. Let’s hold him to his word.

Lesson learned is that taxes are remaining or increasing because of the debt burden created by the city-owned Jobing.com Arena and Camelback Ranch Ballpark. Are they worth it to Glendale residents?

© 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 afternoon workshop session of the Glendale city council of February 4, 2013 was a presentation by Stuart Kent, Glendale’s Executive Director of Public Works (there’s that pesky Executive Director title again!) and the consultancy firm of Rider Levett Bucknell, Ltd. (RLB) at a cost of slightly over $100,000. The presentation was a Total Life Cycle Cost Assessment of the city owned facilities of: Jobing.com Arena; Renaissance Hotel Convention Center & Media Center; Renaissance Parking Garage and Camelback Ranch. Here is the link to the slides used for the presentation: http://www.glendaleaz.com/Clerk/agendasandminutes/documents/01PPT-TLCCAssessment-FinalFinalWorkshopPresentation.pdf  .

The afternoon session was over in the blink of an eye, and lasted for about the half hour it took to make the presentation. Councilmembers eyes glazed over and there was only one question from Councilmember Martinez on a point on which he needed clarification.  Did these councilmembers read this report? Your guess is as good as mine but I would wager most of you would say they did not read it. Well, I did – all 150 pages plus. I even had to find one of my Dad’s magnifying glasses to read all the exhibits which were compressed into teeny, tiny print to fit on an 8 1/2” X 11” sheet of paper. That was no mean feat.

The city can’t catch a break. The financial news goes from bad to worse as contractual costs of maintaining these facilities contribute to the ever-mounting bills the city must pay every year. RLB uses a 50 year life cycle for these facilities. They believe these facilities will last for 75 to 80 years. While that may be accurate, it seems that in 20 years or so the tenants will demand facility updates to remain competitive. That issue was never asked and never addressed. Here are the more important “take aways” from RLB’s Assessment.

Take Away #1: From the Workshop Council Report, Page 1: “The facilities are managed by the current tenants, with associated costs for operation and basic maintenance the responsibility of the tenants. The cost for the capital replacement and repairs are the responsibility of the city in each of the facility agreements.”

Take Away #2: The chart below is an estimate only. The figures could be higher or could be lower than projected or council may decide to delay some improvements.

Capital Improvements: Budget Recommendations, 5-Year Summary

FACILITY

FY 2015 FY 2016 FY 2017 FY                   FY 2018               2019                 Totals
Jobing.com   Arena $4.9M $3.1M $0.0M $0.3M $9.6M $17.9M
Renaissance   Convention & Media Center $0.3M $0.5M $0.6M $0.0M $0.2M $1.6M
Renaissance   Parking Structure $0.1M $0.0M $0.9M $0.0M $0.1M $1.1M
CamelbackRanch   Park $2.1M $0.1M $1.3M $0.7M $1.9M $6.1M
Totals $7.4M $3.7M $2.8M $1.0M $11.8M $26.7M

Take Away #3: Assessment Page 5: “The (arena) facility includes adjacent sitework, parking areas and a service road.” On Page 9 of the Assessment it says, “The City shall be responsible for capital maintenance of the arena Parking Area, which shall include but not be limited to striping, patching, and resurfacing. Section 8.2.1(d).” Yet the city only receives parking revenue after the first $20,000 per event goes to IceArizona. One would think there should have been some cost sharing  for repair and maintenance negotiated.

Take Away #4: Although on page 7 of the Assessment it says it provides the following, no attached facility condition assessment checklists were provided in the report. “The defective items are listed in the attached facility condition assessment checklists and evaluated in the attached facility condition assessment estimate.” It is an important omission. The NHL when managing the arena identified the roof as needing major repair at an estimated cost of $2 million. Without the defect list it is difficult to determine if immediate major roof repair of the arena is included. Defects are categorized under the following headings; 

  • Programmed Maintenance
  • Preventive Maintenance
  • Unscheduled Repairs
  • Emergency Repairs
  • Deficiency Repairs”                                                                                                                                                   

Take Away #5: Page 21 of the Assessment states, “Based on review of the information received to date RLB believes the current building related Sustainment, Operations and Maintenance costs are in the region of $10,000,000 per annum (for the following items):

  • Custodial
  • Energy
  • Grounds
  • Maintenance & Replacement
  • Management
  • Pest Control
  • Refuse
  • Security
  • Telecom
  • Water & Sewer”

It continues on Page 22 with, “In addition to the above noted items there are other additional event-specific related Operational costs (direct event labor and expenses) which currently cost up to $4,000,000 per annum, depending on the number of events being held at Jobing.com Arena. At the time of commencing this TLCC Assessment RLB understood that a portion of the event related expenses were being reimbursed by the National Hockey League (NHL).” To whom?

Take Away #6: From 2003 to 2013 the Projected Arena Income was a negative $43,319,000. When you think about it, it is logical. From 2003 to 2009, 6 years, the city paid no management fee. Since then the city paid the NHL $25 million a year for a total of $50,000 million. There were revenues earned during that period but not enough to cover that major expense. What should be of concern that from 2014 to 2018, the next five years, the projected revenue income is projected to be a deficit of $20,577,000.

Take Away #7: There are 910 parking spaces in the 4 level parking garage per page 7 of RLB Renaissance Parking Structure Assessment. On Page 13 it states that the Hotel has 460 garage spaces + 240 surface parking spaces. Jobing.com Arena Management is allotted 450 of the garage parking spaces. Those are premium parking spaces for which IceArizona charges $20 or $25 per space.

Take Away #8: On Page 28 of the RLB Camelback Ranch Assessment it states,  “As noted previously within this report, RLB did not receive any detailed, specific information pertaining to current Sustainment, Operations and Maintenance costs for Camelback Ranch Park. Based on RLB’s review of a 2011 Cactus Little League Facility Summary (as researched by Broughton/Heimstead) we believe the current facility related Sustainment, Operations and Maintenance costs may be in the regions of $3,800,000 per annum (for the following items):

  • Custodial
  • Energy
  • Grounds
  • Maintenance & Replacement
  • Management
  • Pest Control
  • Refuse
  • Security
  • Telecom
  • Water & Sewer”

What does all of this mean? Darned if I know. No, really, it demonstrates that there are two elephants in Glendale’s room. Check out this comparison.  It’s down and dirty because some of the numbers can only be estimated at this point but it gives one a feel for what is happening at each facility.

                                                        Jobing.com Arena           Camelback Ranch

 

Annual construction debt                    $12M                           approx. $25M

Average annual Capital                      $3.5M                                      $1.2M

Improvement Expense Est.

(over next 5 years)                          

Annual Management fee                      $15M                                           0 

Total average annual expense             $30.5M                                  $26.2M

 

AnnualEst. projected revenue            –  $3M                                      -$ .3M

Annual Est. projected deficit               $27.5M                                   $25.9M

                                        

As can be seen, the deficit numbers for each facility are pretty close to one another. Yet, I cannot begin to count the number of times that someone has said, “Don’t blame the arena for Glendale’s financial problems. Take a look at Camelback Ranch. That’s the real problem.” As you can see, each is a tremendous financial burden on the city at a time when the city faces financial crisis. There are, indeed, two elephants in Glendale’s room. 

© 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 February 4, 2014 morning session of the city council workshop was devoted to budget issues. Here is the link to the presentation slides used by city staff:

http://www.glendaleaz.com/Clerk/agendasandminutes/documents/BudgetWorkshop-20140204.pdf .

It was a long and complicated presentation. I am not reviewing all the minutiae of the meeting but rather let’s look at the “take-aways.”

  • Take-Away #1: Council approved staff’s recommendation that the property tax rate float. The total property tax rate prior to the Great Recession was $1.5951 in Fiscal Year11-12. In Fiscal Year12-13 it was $1.9005. In Fiscal Year13-14 it is $2.2889. Solution #1 to raising more revenue increases the total property tax rate per $100 by $0.6938.
  • Take-Away #2: Council approved making inter-fund interest rates variable based on what the city receives as a return on its investments. Council borrowed money from the landfill, water/sewer enterprise funds as well as the technology replacement fund and the vehicle replacement fund. By floating the interest rate to the rate the city makes on its investments saves the city a considerable amount of interest debt on those loans. The current interest rate is 3.62% at a cost of $1.6 million. With adoption of a variable rate the interest becomes 0.40% next year at an interest cost of $178,640. Solution #2 to raising more revenue makes the interest rate on internal loans variable.
  • Take-Away #3: Council approved a series of 5 strategies to raise further revenue. They include transferring dollars out of the total arts fund balance of $1.066 million. Several years ago Council transferred a little over $2 million out of the arts fund. So it can be done. I don’t think anyone wants to see the arts fund be dissolved and it should retain a fund balance. Another revenue raiser is to audit companies that pay sales tax revenue to the city. Clearly Mayor Weiers (pro business) was uncomfortable with this concept. Staff contends that it will raise revenue for the city but could not project how much. Staff proposed that the amount the General Fund charges departments for support, i.e., legal, financial, human resources, be increased – modestly. Staff indicated that they are still working on a city asset list of properties for sale or lease back. Staff also proposed that the temporary sales tax become permanent, that the rate be increased and that the list of taxable items be increased. Solution #3 is to get blood out of a stone.
  • Take-Away #4: These expenditure items are still in discussion and will be brought back to council but include restructuring of the city’s inter-fund loans (already done) and elimination of the sales tax paid by the city for water use on its own properties (already done). Still on the chopping block is the reduction/elimination of retiree health subsidies; alternative service delivery to citizens; and adjustment (downward) of the city’s contingency fund.

The reduction or elimination of retiree health subsides is truly unconscionable. Many retirees are on fixed, monthly incomes (Social Security) and can ill afford to see their health premiums go even higher. Perhaps if it were proposed as beginning on July 1, 2014 for new retirees who understand that they will not be subsidized and can prepare for it, it could work. Alternative Service Delivery (elimination or privatization of services) should not include the Enterprise Departments of water, sewer or sanitation. These funds are not part of the General Fund deficit for they are stand-alone and rely upon the rate payers to bear the costs of those services. A reduction of those services will have no impact on the General Fund.

The concept of the Contingency Fund is more complex. What staff proposes is to rearrange the deck chairs. Historically, in Glendale, the Contingency Fund was pegged at 10% and all or part of it could be used for unexpected expenses that arose during the course of the Fiscal Year. It remained and often grew from year to year. Staff is proposing that Contingency be set at 5% and still to be used for unanticipated expenses. It will become a renewable line item in the budget that can be made larger or smaller. Now there is introduction of a new concept, Ending Fund Balance (EDF). The EDF would be the city’s savings account for purposes of demonstrating to the bond rating agencies that Glendale has a reserve other than Contingency. Staff wants the EDF to be pegged at 25% of the General Fund Operating Budget. That is an awful lot of money to come up with instantly. Yet that is part of staff’s plan. They want Glendale, in its worst fiscal crisis ever, to turn around instantly and mimic the practices of a Triple A rated city. The idea is sound but the instant execution is not. It is warranted that it took Glendale several years to dig itself into a hole and it stands to reason that it will take several years to dig its way out. There’s an old proverb, “Rome was not built in a day.” Glendale’s financial mess will take more than a day to right itself.

© 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.

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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In the August 24, 2013 edition of the Arizona Republic there is a story entitled Glendale ratings lowered by Russ Wiles and Caitlin McGlade. They report that Moody’s Investors Service downgraded Glendale’s credit ratings from A2 to A3. Even with the downgrade, Glendale’s credit ratings remain in the superior “investment grade” category. It is an omen of Glendale’s future if this council does not act boldly.

Moody’s says, “The downgrade of the GOULT (General Obligation Unlimited Tax) rating primarily reflects unusually weak management practices denoted by ongoing internal and state-controlled investigations of certain financial actions dating back to 2009. The report also cited the “outsized” risk exposure to the Coyotes under a new arena deal that requires the city to pay an annual $15 million management fee to the team’s owners.” Moody’s concerns relate to Glendale’s large debt burden and an overburdened General Fund. It went on to say, “Additionally, the outlook reflects our expectation that Glendale will remain challenged to balance its budget over the medium term due to a high level of fixed costs.” What does it mean and what effect does it have on Glendale?

It means that Glendale’s financial debacle on instituting the Employee Retirement Program (ERP) at a cost of over $6M taken primarily from its Trust Funds, the continuing high fixed costs to the General Fund and its commitment to pay Coyotes ownership $15M a year have been recognized and are of concern to credit rating agencies. The downgrade means that when Glendale has to issue bonds the interest rates will be higher, considerably higher. A simple analogy is that when you wish to buy a house you are pre-qualified. If you have a good credit score your interest rate is low. If you have a poor credit score your interest rate is much higher. Your monthly mortgage payment incorporates that interest rate causing your payment to be within a comfortable or decidedly uncomfortable range. It affects the size of and the quality of the house you can afford to buy.

Glendale ‘s Capital Improvement Program (CIP) will not see new parks, libraries or pools for quite some time because its bond issuances are impacted by the downgraded credit rating. But there are other needs. Bonds are issued to maintain and upgrade Glendale’s basic infrastructure. Moody’s kept the A2 bond rating intact for Glendale’s water and sewer bonds primarily because those services are funded by the users of those services and are not typically impacted by its General Fund. Although Glendale receives Highway User Revenue Funds (HURF) and other shared revenue funds they typically are supplemented by bond issuances for such projects as major road construction. One example is the construction of the Northern Avenue Parkway. Although the state and other cities are sharing in the costs of construction Glendale’s costs are substantial and it issues bonds to cover those costs. There will be impacts, immediate impacts to the issuance of bonds for Glendale’s aging and new but critical infrastructure.

What does Glendale need to do to reverse the downgrading of its bonds? How does Glendale fix it?

SOLUTION ONE: One issue cited by Moody’s is being dealt with now and is the implementation of the recommendations offered in the external audit report. Their adoption will strengthen Glendale’s financial policies, restore integrity to the system and send a signal not only to the bond market but to its citizens that it is serious about reform.

SOLUTION TWO: Another issue cited by Moody’s is the $15M payment to the Coyotes ownership. I can see it now. Members of the Coyotes nation saying here she goes again…blaming the Coyotes. I fully understand the desire to protect from and deflect away any unfavorable information associated with the deal or ownership. Yet it remains the “elephant in the room” that must be acknowledged. It is a decision that Moody’s has used as one of the factors in downgrading Glendale’s bond rating. That’s a fact. There is no immediate fix. Glendale is bound by a 5 year contract and expenses of $75M in management fees over the next five years. It will have to reassess its position after a year’s worth of hockey games to see if the “enhanced revenues” did indeed produce the $9M a year so desperately needed. If the goal is accomplished it provides Glendale some much needed breathing room. If the goal is not achieved Glendale will have to compensate for the revenue loss by making even further adjustments to its General Fund.

SOLUTION THREE: The last major issue is Glendale’s overburdened General Fund — not the Enterprise Funds of Water, Sewer and Sanitation. These funds derive their revenues from rate payers, you and me, when we pay our monthly water, sewer and sanitation bills. The General Fund’s expenses continue to outstrip the revenues it receives in the form of sales tax collection and state shared revenue. Options are limited: sell city assets (a short term fix); further employee reductions; create more efficiency; make draconian cuts; or a combination of all of these options. This is a painful and touchy subject for all. 60% of General Fund expenses are attributable to public safety. Glendale is at the point where it has gangrene in its leg. Do not amputate the leg and watch Glendale die as the gangrene rapidly spreads through the body or amputate the leg; stop the gangrene and Glendale will live long into the future. This is no time for political posturing. This council, each and every one of them, must adopt the will and the internal grit to do whatever is necessary, including cuts, to guarantee Glendale a healthy future. Can they? I hope so. There is no way around it. Their only mandate is to fix it.

©Joyce Clark, 2013

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This site contains copyrighted material the use of which has 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, democracy, 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. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those 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.

AWARD WINNER FRUGAL SPENDERS…#6 MARTINEZ AND #7 KNAACK

Martinez photo

Manny Martinez

Knaack

Yvonne Knaack

Councilmember Martinez spent $7,117.47 in 6 months of expenditures and Vice Mayor Knaack spent $3,672.29. Both exhibited restraint in their spending with the exception of a few items. It would be appropriate to get an explanation from Councilmember Chavira on his expenditures that in 6 months that are 7 ½ times the amount of Vice Mayor Knaack.

It should be noted that Councilmember Martinez spent $4,126.97 (53% of his 6 months of expenditures) for its intended purpose — that of infrastructure improvements within his district. He, like other councilmembers, has cell phone charges of $411.13 and land line charges of $1,328.00. Otherwise his budget is clean and all of his expenditures are reflected in his infrastructure expenditures, phone charges and the state National League of Cities convention.

Vice Mayor Knaack has no phone charges and is to be highly commended for that practice. She did donate $609.62 to the Glendale Arizona Historical Society. I wonder if she was aware of the thousands of dollars this organization received from other councilmembers. She, too, attended the state National League of Cities convention, very frugally.

money 11Both of these councilmembers have repeatedly called for all councilmembers to reign in their spending and to return portions of their budgets back to the city’s General Fund. They are the only 2 councilmembers to consistently practice what they have preached. They get it. They understand that with Glendale’s financial constraints every penny and every dollar and how it is spent becomes important. Kudos to both.

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THE TEASER

This, for those of you not in the media business, is called a “teaser.” Over the coming weeks each councilmember’s budgetary spending will be explored for the past 6 months, from January 15, 2013 when 4 new members took office, to June 30, 2013, the end of Fiscal Year 2013.

greed 1Here is the roster of spending from the highest to the lowest for the last 6 months of Fiscal Year 13:

  • Councilmember Chavira, Yucca district…….$27,748.18
  • Councilmember Alvarez, Ocotillo district ….$26,151.34
  • Councilmember Hugh, Cactus district………$19,711.12
  • Mayor Weiers…………………………………………….$14,041.33
  • Councilmember Sherwood, Sahuaro district..$11,516,89
  • Councilmember Martinez, Cholla district……$  7,717.47
  • Vice Mayor Knaack, Barrel district……………$  3,672.29

Why did Councilmember Chavira spend 7 ½ times the money spent by Vice Mayor Knaack? These are your taxpayer dollars. Is your district representative practicing fiscal restraint at a time when the city has fiscal problems?

Check back over the coming weeks as each councilmember’s budget is reviewed. The answers are revealing.

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