Might Goodyear Already Be At Its Debt Limit?


AZ Republic article in today’s paper; 2/25/2011. AZ Rep Prop Val Article0001

My post title is still a question because I have more work to do to research this further and I have sent inquiries to the city and others in order to find out more.  But given our city’s weary debt burden, I felt it was important to tell you what I have found so far.

 

Thanks to the level headed guidance of our current city council and city management, today, the City of Goodyear has OVER $300 mil of outstanding debt.

Goodyear pays nearly $25 mil PER YEAR in INTEREST on this debt (principal is additional).

That is MORE than we pay for police and fire COMBINED! Think about it. In a city of 55,000, that is $5,500 per resident.

Looking at the general obligation debt (GO) which is less than HALF of Goodyear’s total debt (~$130 mil GO debt) by state constitution, AZ cities can borrow up to 6% of property value for some projects and up to 20% for some others. According to the 2010-11 Budget Book, page 306 (here is it; property valuation limits June 20100001)  as of June 30, 2010 Goodyear could borrow an additional $59 mil by the 6% measure and an additional $67 mil by the 20% measure.

But the property valuation referenced in the Budget Book might be 18 months old according to the AZ Republic article.  If that is the case, then by the 20% limit, Goodyear may have only about $14 mil available to it for any future bonding debt (assumes 20% reduction for 2009 and 8.5% reduction in 2010). We are talking ABSOLUTE limits, here.  Is it wise for a city to be anywhere near its debt limit?  I don’t know the answer to that.  But I would think being somewhere below 50% of your personal LIMIT would be prudent, don’t you? How many of you out there have borrowed nearly EVERY CENT you possibly can?  Not me.

What happens once a city reaches its debt limit and needs more money?  And what if property values continue to fall and Goodyear’s existing debt goes ABOVE it’s constitutional debt limit?

Welcome to the future, Mr. and Ms. Goodyear Taxpayer.

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