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Glendale needs your money to give to down and out millionaires who own professional sports teams
Glendale facing its worst budget woes It foresees $35 mil shortfall as other cities are recovering by Cecilia Chan - May. 29, 2012 10:35 PM The Republic | azcentral.com As most Valley cities are climbing their way out of the recession, Glendale is facing one of its worst budgets in recent memory. Many Valley cities are giving pay raises to employees for the first time in four years. Goodyear residents will see a drop in the city's food tax. Phoenix will restore about $6 million in services in the new fiscal year. And Mesa for the first time in years did not need to make cuts. Compare that with Glendale, where residents are expected to see three separate tax increases, including sales, property and bed taxes. The city anticipates shoring up a $35 million shortfall in its general operating budget with about 50 employee layoffs, slashed services and the sales-tax hike. "There is no doubt this has been one of the most difficult periods in the city's history," Glendale City Councilman Manny Martinez said. Like other Valley cities, Glendale's revenue tanked during the recession. But the West Valley city that transformed into a sports powerhouse during the boom found itself with a unique set of variables in the downturn. Much of its sports debt is paid out of its general operating budget. Those sports costs are set to increase in the coming years, leaving Glendale searching for solid financial footing. Comparing revenue Glendale officials say the challenges are mostly a result of the economic doldrums faced nationally. "They are mostly related to the nation's continued economic issues and reduced consumer spending that greatly affected city sales tax and state-shared revenue," Glendale said in a statement. Like other cities, Glendale expects to see a slight rebound in general operating revenue for the coming budget year, which opens July 1. Still, it's expected to be 25 percent less than the peak of $184 million five years ago. By comparison, Phoenix expects to be nearly 4 percent below its peak; Peoria is about 9 percent below; Surprise is nearly 12 percent below and Chandler is nearly 13 percent less. Only Mesa comes close to Glendale in its five-year drop in revenue. The city in the coming fiscal year expects to be about 24 percent below its peak. Glendale staff would not comment on why the city's revenue dropped more than others in the Valley. "We can only account for Glendale's revenue and cannot speak to the other cities' financial information," the city said. In the 2008-09 budget message, City Manager Ed Beasley said "Glendale has fared better than other valley cities as a result of strategic decisions to diversify the local economy. No longer is Glendale a bedroom community." Glendale slow to make cuts When the recession hit, many Valley cities made tough choices early. By the end of 2008, Mesa handed out pink slips to about 70 employees and cut more than $65 million from its operating budget. Two years ago, Phoenix faced the biggest deficit in city history of $277 million. The city implemented a controversial 2 percent food tax, laid off employees, raised fees and cut more than $63 million in programs and services. Glendale implemented employee furloughs, froze vacant positions and pared back library hours, among other cuts. But the city primarily sought to manage the downturn by streamlining operations and dipping into its "rainy-day fund." For three years, through the current budget year, Glendale heavily relied on general-fund reserves to close spending gaps. In six years, the city ate through $71 million in reserve funds. A budget Glendale's size should have a reserve of nearly $14 million. Glendale's sits at $2 million. The dwindled reserves led Moody's Investors Service to downgrade the city's bond rating earlier this year, which hampered the city's efforts to refinance debt. City staff said the past decisions were based on council direction to minimize service cuts and without knowledge of the future economy. The role of sports With little money left in reserves, the city now faces the upheaval of numerous service cuts and tax hikes. The proposed 0.7 percent sales-tax hike would take the city sales tax to 2.9 percent, which would be among the highest in the Valley. The proposed 61-cent secondary property-tax hike would be phased in over two years. And a bed tax, lobbied for by the city's tourism industry, would climb from 3.4 percent to 5 percent and pay for tourism promotion. Mayor Elaine Scruggs, who once championed the city's sports-district vision, now is among the skeptics. She recently voted against the proposed budget with concerns that sports expenses mean the city will ask more of taxpayers. She doesn't buy the idea that the proposed sales tax will sunset in five years as staff recommends. "There is no plan in our budget for falling off that cliff in five years," she said. Some residents blame the woes on the city's attempt to keep the Phoenix Coyotes at the city-owned Jobing.com Arena. Glendale has fought to keep the team since they were filed into bankruptcy three years ago. Councilwoman Joyce Clark, an advocate of keeping the team, said it's the economy and not the hockey team that caused the financial woes. She and others want to hang onto the vision that the sports-and-entertainment district will reshape the city with visitors, development and the resulting tax revenue. Glendale has pledged $50 million the past two years to the NHL to manage the team and the city's arena until a Coyotes buyer is secured. Only $10 million of that has come directly from the city's operating budget. The rest was borrowed from money paid by users of city utilities, such as sewer. That $40 million is expected to be returned to the utility funds over time from the operating budget. Still, the Coyotes and other sports ventures pressure the city's operating budget. A deal with a potential Coyotes buyer is expected to include the city paying a $17 million arena-management fee next fiscal year. This would be a new bill for the city to pay annually from the general operating fund. The proposed 20-year arena contract with presumptive team buyer Greg Jamison calls for an average $14.5 million annual payment from the city. Glendale pays much of its sports-and -entertainment-district debt from its general operating fund. City leaders preached the idea that the projects would generate sales taxes to cover the debt. About $10 million annually is siphoned from the operating budget to pay the $180 million debt to open the arena, which debuted in 2003. And then there is another sports deal that will soon add an expense to the city's operating fund. The city borrowed $200 million in 2008 to build Camelback Ranch Glendale, the spring-training park for the Los Angeles Dodgers and the Chicago White Sox. The commercial development expected to spring up to generate sales-tax revenue and help pay off the debt never materialized. The city has been using borrowed money to pay the debt, but that will run out in more than a year. Under the current ballpark-payment plan, the city would owe $13 million in the 2013-14 budget year. City staff says they plan to refinance the debt to lower the payments, but the mayor is doubtful based on unsuccessful refinancing efforts earlier this year. |