Goodyear’s Looming Debt Burden

Take a deep breath because this could upset you.  Think professional negligence, or even dereliction of duty.   Once again, where I mention a page number I am referring to the 102 page proposed 2011-12 Goodyear Budget document which you can inspect for yourself right here  2011-12 Draft Budget.

It is always advisable to start the conversation based upon some facts, so here are some facts about Goodyear’s debt problem.

Goodyear Debt Facts

  1. As of July 1, 2011, the City of Goodyear will owe creditors $318,947,032 or about $5,000 of debt for every man, woman, and child who is a resident pg 82.
  2. In 2011, Goodyear is required to pay creditors $23,157,434 in principal and interest payments more than the entire police and fire budgets combined or about $350 per resident pg 83.
  3. In 2011 Goodyear WILL NOT be paying ANY principal on nearly half of its debt or over $150 million.  It will only pay interest which means that none of nearly half of Goodyear’s debt will be reduced pg 82 & 83.
  4. Goodyear’s constitutionally allowed remaining debt capacity dropped last year by 58% from $126 million to $53 million as the result of a 32% drop in property valuations. Pg 93 & pg 306 of 2010-11 budget book.  These valuations are sent from the Maricopa County Assessor to the Maricopa County Treasurer by August 25 of each year. That means that the current city Assessed Value that is quoted in the budget book is nearly one year old already. Did you hear anything about that during city council budget discussions or the retreat? Seems pretty important to me. At current debt levels, if property values drop only another 9.21% or more, (remember, the current valuation is already almost a year old and property values may well have fallen in the past year) the city will exceed it’s allowed 20% debt capacity and I presume will be forced to start paying down some of that debt. The city’s 6% debt capacity allowance would still be about $35 million and perhaps some of that could be used to satisfy the 20% shortfall. I emailed Finance Director Larry Lange with this question but he has not returned any of my phone calls or emails since Georgia became mayor.  Even if the debt could be shifted, at current debt levels, a repeat of this year’s assessed value drop (32%) would wipe out all of Goodyear’s debt capacity.  I have warned city employees repeatedly about the dire consequences to their livelihoods if city council continued to authorize capital projects but I don’t think they believed me.  I wrote a blog about this on Feb 10 of this year.
  5. Goodyear borrowed another $20 million last year alone, increasing its total net debt by $7 million. Pg 83 & pg 295 of 2010-11 budget book
  6. Of the $23 million plus of debt payments Goodyear must make this year, $9.6 million was to General Obligation or GO Bonds. Pg 82
  7. Definition of Secondary Property Tax; pg 99
    “Secondary property taxes are levied for the purpose of funding the principal, interest, and redemption charges on general obligation bonds of the City. The amount of this tax is determined by the annual debt service requirements on the City’s general obligation bonds.”
  8. Goodyear’s secondary property tax revenue estimate for next year is only $4,410,854 (pg 72) or over $5 million short of the required payments on Goodyear’s GO bonds.

Given these dire facts about Goodyear’s debt, one would think that the self advertised “fiscal conservatives” who just got elected to city council would propose a bare bones, worst case scenario budget.  Instead, the 2011-12 budget that Goodyear City Council has brought to the citizens of Goodyear increases year over year spending by 8% and does not even come close to addressing the financial needs of the city and its citizens.

  • The proposed 8% spending increase includes ten line items which by themselves increase year over year spending by nearly $4 million dollars.
  • Council projects imaginary revenues that that will never occur (same as last year) that are 75% higher than what will be collected this year.
  • They have done nothing to address Goodyear’s shrinking debt capacity.
  • They have done nothing to address General Obligation bonds with debt service that is more than double the secondary property tax levy.
  • They have done nothing to address a ball park with over $100 million in debt that has little chance of ever being repaid by the Arizona Sports and Tourism Authority and that no principal is being paid on.  In 20 years or less when the current team contracts run out, Goodyear will have a 20 year old stadium with over $100 million in debt and two baseball teams who will be looking for improvements.
  • They are over charging residents for utilities in order to subsidize the General Fund but not paying down debt, while at the same time raising property tax rates for struggling citizens.

Instead, city council sends home city funded advertisements (In Focus magazine) that paint a rosy picture of the future and nearly every council person is quoted in the press saying that things are looking up so now they can start to spend “available money” again.  Then these same folks who told you they would be fiscally responsible if you voted for them organize a catered, off site, all day retreat where they dream up even more ways to spend your money and make important decisions like defining city “core values”, how to “improve council working relationships”, and agree to stop referring to it as the “city center” and instead call it the “city hub”.  Don’t believe me?  Here are the meeting minutes. Retreat minutes Talk about re-arranging deck chairs on the Titanic.

I wonder how many facts about Goodyear’s dire financial situation were reviewed by the retreat attendees before they started dreaming?

Goodyear should throw out this budget, demand cuts in excess of $4 million dollars from it, leave property taxes where they are, and apply the remaining balance of savings to reducing the debt.

And city council should realize right now that they will need to do this for many years to come.

PS.  If Cavanaugh and Cavalier resigned in part because they could see this coming if Goodyear City Council did not change its ways dramatically, (and they did not expect GCC to change) then I have to give them both cudos for being a lot smarter than what I gave them credit for at the time of their resignations.


3 Responses

  1. Thank you… I’ve been saying the same thing since 2008. But no one listens, and when a city goes under it’s the taxpayer who bears the bill.

  2. PS – I was called “crazy” in 2008. I’m certainly the most sane person I have ever met and was VERY far from crazy – still am pretty far from it. If you care about your city, stomp your feet and scream this at the top of your lungs…

  3. […] (like impact fees) to provide ongoing services (like the cost to maintain new capital projects).  GY council already knows that they will have to raise your property taxes and utility bills some […]

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