Bond Update

Several people have asked me recently for my opinion on the proposed $100 million bond (borrowing) effort by the City of Scottsdale. Here’s an answer that was published recently in the Scottsdale Independent:

Scottsdale resident John Washington says the current proposal is too big and contains too much unnecessary spending.

John Washington“It makes sense to borrow money for initial construction of infrastructure, or for extraordinary repairs that could not have been anticipated,” he said in an April 14 e-mail. “However, funding for ordinary infrastructure maintenance and replacement should be carefully planned and budgeted. It should be funded from revenues, not by borrowing.”

Mr. Washington is the editor of Scottsdale Trails, a local website dedicated to the local politics of Scottsdale.

“Bonding is borrowing. Borrowed money has to be repaid. In this case, the bonds will be repaid by us — the property owners in the city — via increases in our property taxes,” he pointed out on the nature of general obligation bonds.

“It always costs more to borrow than to plan ahead and budget properly. But for the last 10 to 15 years, the mayor and city council — including one David Smith, who was the city treasurer for several years — have done an abysmal job of planning and budgeting.”

Mr. Washington contends Scottsdale residents have the second largest tax burden among cities in the Valley.

“All that time, they’ve given away subsidies to their cronies as fast as they can, including forgiving (and then funding) tens of millions of dollars worth of neglected maintenance for the PGA-leased TPC golf course, and the Phil Mickelson-leased McDowell Mountain Golf; $4 million every year to a private cultural arts management business that has a no-bid, 20-year city contract; and hundreds of thousands of dollars in subsidies to promote polo matches for Mayor Jim Lane’s campaign PR manager.”

Mr. Washington says he wants to see a real discussion at the council level on the topic of wasteful spending.

“Given infrastructure needs that have accumulated from years of neglect, is bonding a necessity?” he said. “Not without proof that the borrowed money won’t simply allow the mayor and council to continue their wasteful crony capitalism.”

Scottsdale already has the highest per-capita debt of any city in the Valley, and one of the highest per-capita tax burdens. We have over a billion dollars in municipal debt, and seem to run a deficit every year in spite of having a Republican mayor and a 100% Republican city council, who don’t understand (or don’t want to understand) fiscal responsibility.

The proposed bond offering is riddled with cronyism. As I referenced in my earlier article about the Blue Sky project, one of the most egregious examples is also one of the largest: Item 26 is $13.5 million to do flood mitigation for a developer (Crossroads East, Diversified Partners) which bought land on which it can’t build without flood control for which it doesn’t want to pay. If more than 1/10 of the bond proposal is such a naked giveaway, how legitimate can the other items be?

You can see the entire, painful 2015 Bond Proposal document on the city’s website. The Republic attempted to cover this topic with a story that appears to have left out the Crossroads East item. Hmmm.

I’ll be strongly recommending a “no” vote on any such bond question, until such time as Mayor Lane, Virginia Korte, and the rest of the city council can demonstrate some real fiscal restraint.

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  1. Bonds are NOT supposed to be used to pay for on going services. Bold statement? NO. I went here:

    Now what does it say on page 5? Here is the text –

    Debt Policies. Both GFOA and ICMA recommend that a jurisdiction adopt debt policies. Such principles should be written in a flexible enough way to allow for the under-funding of infrastructure during hard economic times, although from the public works perspective this might be seen as lack of commitment. The ICMA suggested policies are as follows:(Nollenberger, Groves et al. 2003)p 81.

    1. Proceeds from long-term debt will not be used for current, ongoing operations.
    2. Long-term borrowing will be confined to capital improvements too large to be financed from current revenues.
    3. Bonds will be paid back within a period not to exceed the expected useful life of the capital project.
    4. Where possible, special assessment, revenue, or other self-supporting bonds will be used instead of general obligation bonds.

    So what does it say again?
    1. Proceeds from long-term debt will not be used for current, ongoing operations.

    Why doesn’t our city council understand that? You see ongoing operations are to be paid with tax revenues and/or fees. You DON’T bond for them! But Scottsdale is operating in ‘crisis mode’ and now forcing us to swallow MORE bond debt!

    I really wonder how the city council can think that the city of Scottsdale can continue to operate under the ‘bond or die’ effort. Just ask city staff, they are in ‘crisis mode’ because the last two bonds failed. Gee, how about we find the root cause of the issue. Am I asking too much of our elected and paid city officials?

    PS – You can Google this phrase – what should city bonds be used for – and find much more supporting information.

  2. Replace aging restrooms, maintenance and storage buildings at four city parks $3,400,000 = $ 850,000 per restroom, maintenance and storage buildings seems outrageous to me. Have these restrooms been neglected for the past 30 years and for that matter when were they built? Have they deteriorated so bad they need to be torn down and replaced? Have we seen the city’s assessment for the need? I would like to see the breakdown of the proposed expenses to tear down and rebuild these restrooms. That’s just one line item, let’s examine the remainder.

  3. Install energy-efficient sports field lighting at four facilities $4,600,000 = $1,150,000 per sports field. Wow that blows my mind.
    Purchase disaster recovery technology infrastructure $4,900,000
    Expand and renovate Civic Center Jail and police station $10,100,000
    Improve WiFi in public buildings $470,000
    Total of $23,470,000 that we should see the engineer assessments and breakdown of the expenses.

    Net Position
    June 30, 2014 and 2013 (in thousands)
    2014 2013 2014 2013 2014 2013
    Current and other assets $ 470,224 $ 452,841 $ 409,555 $ 344,660 $ 879,779 $ 797,501
    Capital assets 3,609,808 3,663,472 1,373,850 1,400,476 4,983,658 5,063,948
    Total assets 4,080,032 4,116,313 1,783,405 1,745,136 5,863,437 5,861,449
    Total deferred outflows of resources 19,872 – 3,660 – 23,532 –
    Total assets and deferred outflows of resources 4,099,904 4,116,313 1,787,065 1,745,136 5,886,969 5,861,449
    Long-term liabilities outstanding 943,451 954,334 375,287 356,665 1,318,738 1,310,999
    Other liabilities 180,791 171,424 45,011 45,283 225,802 216,707
    Total liabilities 1,124,242 1,125,758 420,298 401,948 1,544,540 1,527,706
    Net investment in capital assets 2,685,105 2,756,186 1,046,345 1,058,880 3,731,450 3,815,066
    Restricted 109,615 100,472 47,101 41,545 156,716 142,017
    Unrestricted 180,942 133,897 273,321 242,763 454,263 376,660
    Total net position $ 2,975,662 $ 2,990,555 $ 1,366,767 $ 1,343,188 $ 4,342,429 $ 4,333,743
    Unrestricted net assets $376 million

  5. Am I’m missing something … $850,000 per restroom, maintenance and storage buildings? You can build an entire home for less than $100,000 with plenty of storage! The maintenance surely doesn’t come at a sky-high cost unless, of course, a “no bid” contract has been awarded. These facilities need to be “refurbished” … not razed and rebuilt. Where does the city come up with these figures? I’m sure we can cut these $’s by at least half, if not more!

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