Homeless in Arizona

Glendale's sports dream turning into a nightmare

  When you have government idiots and crooks like those in the city of Glendale, Arizona it makes it real easy for the Libertarian to present our case on why government is bad.

Also Glendale Mayor Elaine Scruggs is like a typical politician. She wants to take credit for anything good that happened in Glendale while she was in power and blames anything bad that happened on other people.

"There's enough blame to go around for everybody, The council members basically trusted totally in (city) management and supported management 100 percent or more."

Well Mayor Scruggs, you were in power and if the city management was a bunch of idiots and you listened to them it's your own damn fault. You could have fired them and replaced them, but you didn't.

Also the voters didn't elect the city management. They elected you. You are the person that made all the bad decisions, not the city management you are blaming.

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Glendale's sports dream turning into a nightmare

Big investments putting financial strain on city

by Lisa Halverstadt - Sept. 28, 2012 11:33 PM

The Republic | azcentral.com

Glendale leaders did more than pay big money for a hockey arena, a spring-training ballpark and facilities such as a top-notch media complex and convention center. They guaranteed payment of the sports and entertainment debt with sales-tax dollars, the lifeblood of city operations.

That allowed Glendale to move quickly on deals with no need for a vote by residents. But it also means that Glendale could use as much as a quarter of its general fund to feed the city's sports and entertainment district, a commitment that's led to layoffs and service cuts.

The city also grabbed $50 million from water and sewer funds to keep the Phoenix Coyotes at the city-owned arena for the past two years.

That's not how city leaders envisioned it. They initially structured the deals so the sports venues could pay for themselves by spurring high-end development. That hasn't happened, in part because of the recession.

The city this year expects to collect about $10 million from those sports venues and surrounding commercial development, such as Westgate City Center, to help pay the debt.

The annual debt payment is two to three times that, $23 million to $29 million this year, depending on whether the city can successfully refinance. In addition to the debt payment, the city will pay millions more for someone to manage Jobing.com Arena.

The sports debt, coupled with a voter initiative on the November ballot to repeal a city sales-tax hike, has some worried the city could be pushed to the brink of bankruptcy. But city administrators and experts say that is less likely than painful budget cuts. Among those unveiled this week: shuttering libraries, laying off nearly a quarter of city staff and even eliminating a decades-old holiday festival that draws thousands from across the Valley.

Political upheaval has accompanied the budget strife. The mayor and two City Council members, who for years touted the sports and entertainment vision, are not seeking re-election. The city manager who was the architect of that plan retired in June.

"We were once called visionaries," said Glendale Councilman Manny Martinez. "Now we're being called other things which I won't name."

Financing sports

Apart from the projects themselves, perhaps Glendale's greatest risk was its method of payment: sales-tax hauls.

Glendale first venture into professional sports began a decade ago with the Phoenix Coyotes. City leaders said the $180 million investment into the hockey and concert arena wouldn't cost taxpayers anything. Financial projections in the 2001 deal showed the city would collect an average of $20 million annually in sales taxes, parking fees and other revenue to cover the debt and then some.

The revenue has never come close to that.

The city was further hampered by increased expenses in the wake of the team's bankruptcy three years ago. Glendale now must pay an arena-management fee, although city leaders are haggling over how much they can afford.

Months before the Coyotes' bankruptcy, as financial markets teetered and some banks collapsed in fall 2008, Glendale borrowed more money -- $200 million for a spring-training ballpark.

Back when council had approved the deal, they had lauded plans for Camelback Ranch Glendale, training home of the Los Angeles Dodgers and the Chicago White Sox.

Two council members noted the deal wouldn't cost taxpayers anything. Rather, the Arizona Sports and Tourism Authority and revenue generated from posh private development around the ballpark were supposed to pay for it.

A year later, sports authority officials said the recession had stymied its ability to pay a big chunk of the ballpark debt. And the surrounding development never came as the land fell into foreclosure.

Today, with an improving economy and some refinancing, sports authority officials project they could begin to pay a portion of the city's ballpark debt in 2018.

But the city must make annual debt payments now.

About $50 million of the city's ballpark borrowing was a cushion to make payments until revenue generators kicked in. Glendale has eaten through that security, which means the annual debt payment hits the general fund this year.

The ballpark and hockey arena were the city's biggest investments in its sports and entertainment district, financed with the guarantee of sales-tax revenue, but not the only ones.

The city borrowed $75.9 million to build a conference center, parking garage and media center attached to the city's first four-star hotel, the Renaissance Glendale Hotel & Spa.

Another $6.7 million went for infrastructure around Cabela's, the massive outdoor retailer.

Municipal finance experts say such investments that rely on sales-tax hauls, rather than the more traditional property taxes, can be shaky for cities.

"Income moves with the state of the economy and sales are subject to the economy so this is subject to risk," said Chester Spatt, a professor at Carnegie Mellon University who once served as a chief economist for the U.S. Securities and Exchange Commission.

Projects that rely on such funds, particularly for sports and entertainment, are exciting when "government is flush with money" but can create challenges later, he said.

Phoenix-based fund manager Todd Curtis agreed.

Glendale "expected much more robustness in sales-tax revenue," Curtis said. "They went out and spent money they expected to get in the future and the money didn't come in."

Moody's Investor Service, a credit-rating company, downgraded the city's bond-rating on a portion of its debt in January. But the city has retained A ratings on Moody's scale, which runs from a high of AAA to a low of C.

Analysts noted the city's reliance on sales-tax hauls and the toll of a more than three-year search for a new Coyotes owner.

Moody's analyst Matt Jones told The Arizona Republic that the city's investment in sports and entertainment distinguishes it from other cities that have relied on sales taxes to pay for major projects.

Many cities across the nation have used sales taxes to build water treatment plants or city buildings, but Glendale's sports and entertainment vision is more risky because it relies on the success of sports teams and developers, Jones said.

"Absent resources from the hockey team, they have to find a place in their own budget (to pay the bills) and that's what they're experiencing right now," Jones said.

Sports debt meets recession

Glendale's sports costs rose as revenues were shrinking dramatically in the recession to create the city's woes.

The city's general-fund revenues plummeted 25 percent from fiscal year 2008 to 2012.

Through much of the downturn, Glendale touted its firm financial footing and made less severe reductions that didn't have a large impact on city services. The city used its rainy day fund, taking it from $72.5 million in fiscal 2006 to $2 million today.

Glendale Mayor Elaine Scruggs, who has led the city for nearly two decades, now wishes she and other council members had demanded deeper cuts and asked more questions as staff presented the sports and entertainment deals in the past.

"There's enough blame to go around for everybody," Scruggs said. "The council members basically trusted totally in (city) management and supported management 100 percent or more."

Councilman Martinez said he remains hopeful the city's sports and entertainment plans will pan out once the economy recovers.

Still, he acknowledges the city's struggles and the potentially devastating cuts if voters reverse the sales-tax hike.

As Glendale faced continued deficits this fiscal year, the council temporarily increased the city sales-tax rate from 1.2 percent to 1.9 percent.

Business leaders and residents angered by the burden and a lack of communication about the tax responded with the ballot initiative to repeal the tax hike. If voters approve the measure in November, the city would lose an estimated $22 million to $25 million annually.

Voters who repeatedly re-elected the mayor and council now are concerned as the city has pared back services and offered plans for far more cutbacks should the tax go down.

The city could lay off another 250 employees, including police officers and firefighters. A long list of proposed cuts includes closing two of three city libraries, one of its two aquatic centers and all city festivals, including the popular Glendale Glitters holiday event.

The turmoil comes as the city faces its most transformational election season in years, as voters will select a new mayor and at least two new council members.

Most candidates call for an independent forensic audit of city spending.

Some candidates and even Scruggs have questioned whether the city could face bankruptcy. Strict cuts before bankruptcy

Glendale's top administrators say the city is nowhere near that point.

"We've got a long way to go before we're going to be talking about bankruptcy," said Diane Goke, the city's finance director.

Interim City Manager Horatio Skeete said he's focused on finding other fixes.

Skeete has offered five-year budget solutions that plan for the variables: voters' decision on the sales-tax hike, the cost of an arena-management fee and refinancing the debt on the spring-training ballpark.

Each of his plans show the city paying its bills and rebuilding its reserves to between $12 million and $13 million in the next five years.

Finance experts aren't convinced Glendale is headed for bankruptcy either. The city can make additional cuts, find ways to bring in more revenue, and continue to draw from funds that support water, sewer and other needs.

They say Chapter 9 bankruptcy, which allows cities to resolve their debts, is the last resort.

Cities that file for bankruptcy hurt their credit and can struggle to get financial assistance for future projects, said Jim Spiotto, a Chicago-based attorney who has written extensively about municipal bankruptcies.

"Your cost of borrowing goes up and if your cost of borrowing goes up it comes out of your taxpayers," he said.

For that reason, only one Arizona city -- South Tucson -- has filed for bankruptcy since the 1930s, he said.

Bankruptcy also doesn't mean a city avoids draconian cuts.

Vallejo, one of a handful of California cities that have recently filed for bankruptcy, still had to pay most of its debts and was left with massive legal bills, said John Mikesell, a government finance professor at Indiana University.

"When they come out they're kind of battered and bruised and you never know what the long-term consequences are going to be after bankruptcy," he said.

For example, Mikesell said, tax increases or layoffs could be required due to legal fees and businesses may be reluctant to relocate to a city.

But Mikesell and others believe Glendale can avoid that result.

The city is putting together plans to balance its budget, and none involve not paying the bills.

Scruggs also believes the city can survive if council members are willing to hold firm on cuts necessary to balance the city's budget.

"I really think the city can turn around and come out of this," the mayor said.

Republic reporter Sonu Munshi contributed to this article.


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Laurie Roberts' Columns & Blog | Arizona Republic Columnist

Don't blame Coyotes for Glendale's problems (Blame Glendale)

By LAURIE ROBERTS

Fri, Sep 28 2012

It took just 22 minutes for the Glendale City Council to agree to shell out $180 million to build an arena for the Phoenix Coyotes. City leaders had spent the previous weekend urging then-Coyotes owner Steve Ellman to dump Scottsdale – where skeptical city officials weren’t buying his pitch – and come west.

In a flash, Glendale’s dazzling dreams of hockey grandeur were coming true.

“It truly is a historical event,” a beaming Glendale Mayor Elaine Scruggs said that April evening in 2001.

Turns out Scruggs was right.

Eleven years later, the city is in a financial hole of historic proportion as a result of its sports-crazed leaders.

Glendale is now facing the distinct possibility its citizens will revolt and repeal the temporary sales tax stuck to them in August – a tax the city is desperate to hang onto given the avalanche of sports bills that threaten to send the place into a financial freefall.

Even if voters agree on Nov. 6 to continue the added tax to pay for professional hockey and spring baseball digs, cuts of “optional” stuff – you know, parks and libraries and police and such – still are coming.

Glendale doesn’t glitter lately as much as it bleeds red ink.

Which is why I was astonished this week to see the city continue its losing quest to fight a casino on its border.

There’s no question but that the Tohono O’odham pulled a fast one after Arizona voters in 2002 gave the tribes exclusive rights to gaming, based in part on a promise that no new casinos would be built in the Valley. Within a year, this southern Arizona tribe quietly bought land on a county island at 95th and Northern avenues and proceceeded to have it designated as part of its reservation so it could plop down a casino.

Glendale and others sued, but the tribe has prevailed at every turn.

So, of course, the city that’s broke on Tuesday voted to continue the fight, despite this month’s loss before the 9th Circuit Court of Appeals. Cost thus far: $3.2 million in legal fees – and growing.

That $3.2 million could have kept a lot of librarians in business.

Even as the City Council voted to continue tilting at slot machines, city management unveiled its plan for what happens if voters repeal the tax. The Pass-It-Or-Else Plan, as I call it, goes on tour next week in Glendale neighborhoods.

Basically, the city is threatening to gut its staff, close two of three libraries, drain a pool, cancel all downtown festivals – events that actually make money -- and of course, it’s employing the favorite threat of cities everywhere: cut police and firefighters.

All this, if citizens overrule their leaders and ax the sales tax.

But the most galling part of all? The city’s insistence that its desperation is due to the economy.

“Many people say the Coyotes are the cause of this problem, but that’s not the truth,” Councilman Manny Martinez told citizens this week.

Actually, he’s right. The Coyotes aren’t the problem. The city’s leadership is the problem…

…Leaders who put residents on the hook for a hocky arena that has brought in a grand total of $3.8 million in direct tax revenue since May 2010, while costing $50 million in management fees.

…Leaders who have committed to paying $16 million a year for the next 20 years to Greg Jamison, if only he will buy the Coyotes and keep the team in Glendale. Already, they’re trying to renegotiate that stinker. But their predicament will likely get worse if the team departs, leaving taxpayers with an empty $180 million white elephant to pay off.

…Leaders who were so desperate to grab a piece of the Cactus League that they built a $200 million spring-training complex in 2008. That shrewd deal will cost taxpayers $13 million in the coming year, with none of the new retail promised to pay the debt the city now faces for the next 30 years.

…Leaders who, despite it all, still want to fight the Tohono O’odham.

Fighting still, when they should be teaming up with the tribe. In fact, if I was mayor I would knock off the lawsuit and immediately make the Tohono O’odham -- they of the portable reservation -- a peace offering.

To wit: Jobing.com Arena and Camelback Ranch.

Toss a few slot machines near center ice and down the third base line and you could quickly pay off a decade’s worth of this city’s deplorable decisions.

And if that works, Glendale’s residents might also want to hand over city hall.

 
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