Because of her penchant for bragging about Scottsdale’s AAA (“Triple-A”) bond rating, many of us took to calling Mary Manross “Jane Bond” in her last years of office. It seemed like that was her answer to every criticism leveled at her. Even Jim Lane (the mayoral candidate) criticized her for this overly simplistic and short-sighted approach to economic policy.
Perhaps her greatest accomplishment for economic vitality was bailing out Steve Ellman and paying double the appraised value for the property taken off the property tax roles and given to ASU Foundation (not the educational institution) for the construction of SkySong. We all know what a boon that has been.
Now we have word (coming via our own City Treasurer David Smith) that the town to which Ellman took his snake oil roadshow is in some serious trouble that has now affected their bond rating:
Moody’s Investors Service announced a downgrade to the City of Glendale’s general obligation bonds, just as the City is attempting to sell $55 million in new bonds.
Moody’s downgraded the securities from Aa2 (two notches below Aaa) to Aa3 (three notches below). Moody’s downgrade recognized the City’s obligations to the NHL, as well as weakness in sales tax receipts and a drop in the City’s general fund reserves.
Additionally, Moody’s has placed the City’s ratings on “negative outlook.” This action reflects the risk that the city will be obligated to make additional payments to the NHL, “…which would further stress the city’s already narrowed financial position.” The negative outlook also reflects “…expectations for further tax base declines in coming years creating budgetary pressures that may require politically challenging revenue raising measures or cuts to city services.”
Now I don’t think our problems are nearly as severe as Glendale’s. However, even City Treasurer Smith says we are approaching an Amtrak-like crisis because of balancing our budget for the last few years by not transferring enough money from the General Fund to the Capital Improvements Fund. He also says we “need” a $200 million dollar bond to make up for that failure of leadership. Did I mention Smith was CFO of Amtrak?
Just to remind myself and anyone else who is concerned about this: “Issuing a bond,” is a subtle way of saying, “borrowing money.” A good bond rating (AAA is great) is like a good credit rating. The better it is, the easier it is to borrow and the lower the interest rate.
However, just because you have a good credit rating doesn’t mean you SHOULD borrow. I don’t think you should borrow money to maintain capital investments (roads, sewers, water system, etc). Plus, the debt on the money borrowed has to be paid somehow. Inevitably the result will be new taxes. None of this would be necessary if we’d stop playing the spend-and-tax game.
You’d think Manross would have learned her lesson from the Galleria. But, she did the SkySong deal anyway. Lane continues this fiscal ineptitude by not demanding competitive bidding for sale of city assets. Examples include the no-bid sale of the downtown senior center to Scottsdale Healthcare, and the no-bid sale of city-owned property adjacent to SkySong to an apartment developer. At the same time we have looming taxes hidden in the Southwest Gas franchise agreement (on the March ballot) and a not-so-hidden increase in sewer fees. And, I should add, he’s planning to allow ASU Foundation to renegotiate their lease of the SkySong property. Any guesses as to whether that’s going to be beneficial to them or to the taxpayers?
Good bond ratings are a function of long-term fiscal leadership. Scottsdale’s AAA rating isn’t due to Mary Manross, and it isn’t due to Jim Lane. It’s due largely to our tourist-based economy that brings money from outside our community into our coffers. Scottsdale’s leaders need first to understand this, and second to carefully evaluate the ramifications of their decisions upon that dynamic.