preliminary fy 2011-12 city of glendale, az annual budget book

2012-2021 CAPITAL IMPROVEMENT PLAN
Financing the CIP
Existing G.O. debt service addresses bonds issued over the last several years to pay for numerous
capital projects such as the Emergency Operations Center, Public Safety Training Facility, the
downtown parking garage, fire stations 159 and 151, the Glendale Adult Center, the Foothills
Recreation and Aquatic Center, the Rose Lane Pool Aquatic Center, various flood control
projects such as the Bethany Home Outfall Channel, and the downtown plaza and civic center
annex.
Table 2-3 clearly illustrates the gap between estimated secondary property tax revenue and G.O.
debt service on existing bonds once the BAB subsidy and impact fee contribution are taken into
account. Significantly less revenue is projected to come in to pay debt service on existing GO
bonds, let alone to fund any new projects, as a result of the:
• Unprecedented decline in assessed valuation across the real estate market
• Reduction in the assessment ratio for commercial properties per state statutes
• Reduction of the city’s secondary property tax rate in FY 2008 and FY 2009
Given Council’s prior direction to keep the secondary property tax rate unchanged, the first five
years of the G.O. component of the CIP had to be restructured to push back into the last five
years of the plan all but two projects (plus any carryover from projects currently underway). The
two projects retained in the first five years of the G.O. component of the CIP are listed below.
• One is in the Public Safety category and is related to ongoing improvements to the public
safety digital communication system.
• The second project is in the Flood Control category and addresses the cost of a regulatory
permit the city is required to maintain.
Notable G.O. projects on hold are the completion of the new Municipal Court and the West Area
Library. Both of these projects were in FY 2015 in the adopted FY 2011 – 2020 CIP (FY 2011
budget book); they are now in the last five years of the capital plan.
The significantly changed landscape will necessitate an evaluation of the city’s secondary
property tax rate over the next year. This is especially true if the city is not able to restructure
existing G.O. bond debt service along more favorable terms so annual debt service payments can
more closely match the diminished revenue stream.
If this declining trend in property values continues beyond next year, as projected, the city will
have to consider a change to the way it assesses secondary property tax to maintain a fiscally
sound plan to protect our bond rating for the future. One concept staff will evaluate over the
summer and fall is the one used by many valley communities today. That approach is based on
establishing a rate based on the funds needed to service outstanding debt issuances, the capital
needs of the city and the minimum fund balance needed to maintain a fiscally sound plan.
The plan of action is to evaluate debt restructuring options through this upcoming fall and return
to Council with a revised DMP and recommended options for Council’s annual retreat. This
timeframe allows staff to evaluate fully the range of options as well as assess the 2011 real estate
market, which will affect the secondary property tax revenue to be received in FY 2014.
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