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Joyce Clark Unfiltered

For "the rest of the story"

Jul 19

27

State legislature is no fiscal friend of cities

Posted by Joyce Clark on July 27, 2019
Posted in City issue and actions • City of Glendale • Glendale Economic Development • Glendale finances • Phoenix Metro issues  | Tagged With: , , , | 1 Comment

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.

The state legislature seems to have a love/hate relationship with every city in the state. Here are some of the more egregious examples. One is the state’s diminishment of the cities’ ability to collect Impact Fees; another is the state usurpation of every city’s ability to collect sales tax; and lastly the state’s reduction in the distribution amount of Highway User Revenue Funds (HURF) it is required to share with every city in the state.

In 2011, the Arizona legislature passed Senate Bill 1525. This bill restricts cities’ ability to collect Impact Fees from the development community. This diminishes the amount of money needed for libraries, community parks, streets and infrastructure, open space and trails.

So what, what do you care? Well, you should care because the restrictions on the collection of Impact Fees don’t mean that these things are not built. They still are…only now; you the taxpayer are paying for new growth in your town or city.

How does it impact you? It used to be in this state the mandate was “growth should pay for growth.” That no longer applies. Here’s a hypothetical. A developer wants to build a subdivision of 250 new homes on the periphery of your city. That developer would have to pay a set Impact Fee per house to help cover the cost of infrastructure to support and provide services to the new subdivision. Perhaps the arterial street abutting the subdivision would now require widening to accommodate the new traffic from the subdivision. Or perhaps the nearest fire station or library was pretty far away requiring a new fire station or library.  The Impact Fee charged by the city would help to defray the cost of widening the street or putting in a new fire station or library. The Development Impact Fee cost to the developer is added onto the price of each new home. The developer might raise the price of the new home by a $1,000 or $2,000. That money would go into the city’s accounts to help pay for the new infrastructure causing new growth to help pay for itself.

What happens when the Impact Fees have been reduced or eliminated by the state legislature? The city still needs to widen that street or to build that fire station or library. Where will the money come from? Why, the taxes you pay, of course. Now you are paying for that new growth.

There is one case when the loss of Impact Fees is not as detrimental to a city or town and that is with Infill Development. With Infill Development a developer takes a piece of land within an established area of a city and builds maybe 30 or 50 new homes on it. That land has been vacant for years but already has an adequate arterial street and a nearby fire station or library. There is no need to build new infrastructure. In that case the Development Impact Fees are used for any needed expansion of nearby infrastructure.

Yet in its heavy-handed way, the state legislature makes no distinction on the imposition of Impact Fees between an Infill Development in an established area of a city and new development that is sited where there is no city infrastructure. Why has this happened? Because the pro-development lobby is the 900 lb. gorilla with deep pockets that contributes to every state legislator’s election campaign (if the legislator is on the ‘right’ side of the issue). Taxpayers have no such lobby and therefore in a battle between the pro-development lobby and the taxpayer, guess who wins?

Another example of the heavy handedness of the state legislature is the mandate passed in 2016 requiring all cities and counties sales taxes to be collected by the state by January of 2017. To add further insult to this injury, cities must pay the state to collect sales tax…they must now pay the state to do what they did for a hundred years. Glendale paid over $650,000 this fiscal year to the state to pay for what it had collected on its own previously.

To make matters worse, in an audit of the state Department of Revenue released in June of this year it was revealed that the state does a lousy job of collecting sales tax. The department simply missed identifying businesses and erased a bunch of active businesses that were paying their taxes. After the department took over collection from the cities at one point just stopped checking to see whether all businesses were even licensed.

Cities are now forced to retain their employees that check payment of business sales tax. In other words cities have to double check the work of the state department to insure that not only the tax is being paid but that it is a correct amount. So much for a better state ‘mouse trap’.

Why would the state take over sales tax collection? The state says it’s in the name of efficiency and simplicity for businesses paying sales tax. If a business does business in more than one city, it has to file a sales tax return in each city monthly. Now the business, no matter where or in how many jurisdictions it does business sends all sales tax collected to the state who then distributes it to the appropriate jurisdiction.

But there could be another reason. When cities collected the sales tax they would send the state’s portion to the state in a day or two or perhaps even in a week. While the cities hold the sales tax funds the cities are collecting interest on that money. Obviously the amount of sales tax collected monthly is enormous. With the state collecting the sales tax, it puts the proceeds in an interest bearing account and now the state is receiving the interest until it remits the proper amount to each jurisdiction.  Now the state earns the interest on the funds it collects until it disburses it to the jurisdictions.

Some of the money every taxpayer pays to the state is known as state shared revenue. One is the Highway User Revenue Fund (the tax you pay on each gallon of gasoline and is known by the acronym HURF). There is a formula that dictates a portion of HURF must be distributed to cities based upon their population. When the Great Recession occurred the state unilaterally slashed the amount of HURF state shared revenue it distributed to each and every city to help cover the state’s shortfall in its budget. While that was a great move to keep the state budget whole, it hurt every city that relied upon HURF dollars for part of the revenue for their budgets during that same recession. The state is only now beginning to share all of the state shared revenue amounts with cities that it is mandated to do.

It often appears to city leaders that the state will favor the interests of their business or pro-development friends over those of cities. Often that means that you, the individual, pays for the state’s decisions that favor interests other than yours.  The state continues to demonstrate over the years that it is not always fiscally friendly to the city in which you reside.

© Joyce Clark, 2019         

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.

Apr 17

20

Glendale’s budget, Part 3

Posted by Joyce Clark on April 20, 2017
Posted in City issue and actions • City of Glendale • Glendale finances  | Tagged With: , , , , | No Comments yet, please leave one

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.

In my last blog I said that I would tackle General Obligation (G.O.) Bonds and Development Impact Fees (DIF). Both are complicated issues and I will do my best to explain their origin, purpose and use.

General Obligation (G.O.) Bonds. These and many other funding mechanisms cities use were created by and are still regulated by the state of Arizona.

The city uses G.O. bonds to fund many large scale capital projects, in other words, it is a major component of its Capital Improvement Plan. Every city must pay the principal and interest on these bonds through its secondary property tax.

However, the state constitution specifically limits the amount a city can borrow for G.O. bonds to 6% or 20% of a city’s total assessed valuation. In Glendale 6% bonds may be issued for economic development, cultural facilities, government facilities and libraries. However, the state constitution allows one exception, granting cities the ability to issue 20% bonds in these specific areas: flood control, open space/trails, public safety and streets/parking. Generally, these are extraordinarily big ticket items. Hence the exception.

Glendale’s total assessed valuation as of June 30, 2016 was $1,174,931,000. Multiply this figure by 6% and we have a figure of $70, 496,000. That $70 million figure is the total allowable capacity in Glendale for 6% debt.  In other words, if Glendale had the ability through the collection of secondary property tax to cover the principal and interest on just the category of 6% debt, it could do so. Now multiply $1,174,931,000 by 20% and we have a figure of $234,986,000 as the maximum allowable in the 20% bond debt category.

OK, we have a maximum 6% debt capacity of $70+ million and a maximum 20% debt capacity of $234+ million. Then why doesn’t the city just issue bonds in these amounts and be done with it?

Because there are two other factors that govern how much debt a city can take on. One is the city’s ability to repay annual debt. State statute mandates the city must pay the principal and interest on G.O. bonds from the secondary property tax it collects. It is prudent for a city to be conservative and try to figure out how much it can pay on debt not just in good economic times but when the economy takes a nose dive as it did for 5 years during the Great Recession.

The other factor is based upon you, the voter. Just because a city has debt capacity that doesn’t mean it can use it. Every city must go to the voters in a bond authorization election and ask for your permission to issue debt in each category for a capped amount of money. The most recent city-wide bond elections were held in 1981, 1987, 1999, and 2007. I won’t go through the whole list and how much bond authorization was approved in each category in each of the listed bond elections. In the last election in 2007 voters approved the issuance of bonds for flood control for a cap of $20 million+); Parks and recreation for a cap of $16 million +; Public safety for a cap of $102 million +; and Streets and Parking for a cap of $79 million+.

Both of these factors determine how much debt a city could take on in a given year. Even if you, the voter, have approved a maximum amount of debt in a certain category, such as flood control, the city must then look at how much debt it can comfortably afford to repay in good years and in bad years.

Another component of the CIP is Development Impact Fees (DIF). For many, many years Arizona lived by the imperative that “growth pays for growth.” It meant that developers had to pay X amount per house and it went into a city’s DIF. It allowed Glendale and every other Arizona city to use DIF to fund new parks, libraries, streets, police, fire, sanitation, water and sewer. It was a good funding mechanism for cities. As new residential subdivisions came on board cities would get DIF funds from the developer that was used, for example, to expand or build a new park. Need a new fire station because of several new subdivisions? DIF was used to offset the cost.

But the developers were not a happy lot.  For you see, DIF was added by them to the price of each new home. They complained that DIF was making their homes cost too much. They lobbied the state legislature and in 2011, SB 1525 was passed. Under this legislation some categories eligible for DIF were eliminated. Others were severely restricted and the formulas for the amount of DIF that could be collected were reduced to make them almost meaningless. This bill restricted every city’s ability to collect a reasonable DIF that followed the mandate of “growth paying for growth.” The state legislature at the behest of the development industry’s lobbyists literally passed on the cost of growth to the cities. And why would legislators do so? It’s understandable.  Many members of the development community contribute serious money to their campaigns.

 Suddenly cities found that in many cases, they simply did not have enough money to pay for infrastructure needed because of new growth in their communities.  If I were to make an educated guess I would estimate that Glendale has lost somewhere between $5 and $10 million dollars in DIF annually. Oh by the way, did developers drop the price of their new homes because DIF was suddenly reduced considerably by their buddies down at the state legislature? The answer is ‘no’… but their profit margins did increase.

© 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.

Nov 13

19

Wishful thinking

Posted by Joyce Clark on November 19, 2013
Posted in City issue and actions • City of Glendale • Glendale finances • Glendale Municipal Airport • Glendale zoning issues  | Tagged With: , , , , , , , | 2 Comments

 

The Tuesday, November 19, 2013 Glendale city council workshop is jam packed and includes a Development Impact Fee update, the Fire Department Budget deficit, special project recommendations and the Ballpark Boulevard extension.

Since the Arizona Legislature changed the way all cities in the state can impose, collect and spend Development Impact Fees Glendale, like many other cities, has developed a new Impact Fee structure. Impact Fees are charged to new developments and the developers typically add these fees into the price of a home, apartment, office, commercial or industrial building. Tischler Bise is the consultant hired to prepare the study on Impact Fees. I would like to know the cost of the study for I assure you, as thorough as it is, it was not cheap.

The consultants divide Glendale into three zones. The East Zone runs the entire length of Glendale, north to south and from 43rd Avenue to 75th Avenue. It is a very large zone and is approximately 42 square miles.  The Loop 101 zone is the smallest running from Northern Avenue to Camelback Road, 75th Avenue to 115 Avenue. It is a very small zone and is approximately 13 square miles. The West Zone is all land within Glendale’s annexation boundaries and is approximately 36 square miles. Although very thorough the consultants provide no rationale for the establishment of the Zones that are essential to the study.

There is concern with the disparity of size of the zones for they comprise a “nexus.” By that is meant that development impact fees are collected and spent within each zone. With the Loop 101 Zone being the smallest there will be less opportunity to collect/spend fees to provide the same quantity and quality of infrastructure as enjoyed by the East Zone. As an equitable issue all land south of Northern Avenue from 43rd Avenue to 115th Avenue should form the Loop 101 Zone. That would remove approx. 12 square miles from the East Zone making it approx. 30 square miles and increasing the Loop 101 Zone to 25 square miles. The West Zone would remain static at 36 square miles.

The balance of the study is impressive. Their facts and figures are well grounded and formulas are used to determine what the new fee structure for state mandated infrastructure should be. Although the Development Impact Fee structure is no longer what Glendale and every other city used previously there is no choice but to work within the new state-mandated regulations. We will not see the kind of Impact Fees that helped to make Glendale what it is today but it is important that we make the best use of them possible. With the exception of the determination of the zone configuration this is exactly what this study does.

The second item of discussion is the fire department’s deficit. There is but one question to ask. Is the fire department being managed effectively by current Fire Chief Burdick? In juxtaposition the Police Department led by Chief Deborah Black is not facing this kind of deficit. What kind of deficit? How about $1,674,887 minus one-time savings netting a deficit of $1,328,070? In addition the on-going, annual deficit of over $800,000  goes to pay for overtime due to the department’s philosophy of “constant staffing.” It’s time for a study to demonstrate which brings more value to citizens – constant staffing which entails an enormous amount of overtime at time and a half pay or the hiring of more personnel eliminating the need for the constant staffing regimen and its requisite overtime pay.

That item will be followed by a presentation and discussion of recommendations that resulted from the half million dollar external audit.  The City Auditor’s and City Attorney’s roles will be part of that discussion as well as the Trust Fund Citizen Boards and departmental internal premiums for risk management.

The last item of discussion will be what to do about Ballpark Boulevard. The city in an agreement with the two baseball teams agreed to extend Ballpark Boulevard north to 99th Avenue and Maryland Avenue. The current, approved concept will cost the city $18 million to acquire land for right-of-way and construction. Mayor Weiers asked that two alternatives be considered that would come in between $6 and $8 million. Both of these alternatives would run adjacent to the city’s airport on either its west or east side. The only problem with the alternatives is that they will not replace the contractually mandated concept of connecting to 99th and Maryland. That will still have to be done. So the question is…does the city construct a stop gap measure costing $6 to $8 million now knowing that down the road it still must spend $18 million per its contract with the City of Phoenix and both baseball teams? The city has no money right now and without any demonstrated urgency it is something that can wait. Neither Phoenix nor the teams are demanding immediate action.

This is not going to be one of the council’s typical one hour or less meetings. The issues are complex and I would hope that council “has done its homework” and is prepared to ask meaningful and relevant questions on all of these complex issues…but then again, it could be wishful thinking.

© Joyce Clark, 2013

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