Phoenix Needs a Debt Plan Before Adding More

PHOENIX, ARIZONA. April 23, 2010.  Phoenix City Councilman, Claude Mattox, wrote to address the City of Phoenix's budget situation and choices:

Because of the steep drop in property values during this economic recession, a dynamic described in a recent Arizona Republic article, (“Home Values Impacting City Projects”,Friday) the Phoenix City Council is facing difficult decisions regarding property tax policies.  Without changes to our current policies, the revenue generated from our property taxes will not be enough to pay our debt service in a few years. 

Without changes to our current policies, our excellent bond ratings of AAA and AA1 with Standard and Poor's and Moody's bond rating companies could be jeopardized.  A change in our bond ratings could lead to significantly higher borrowing costs that would then affect future budgets. 

The City Council needs to decide whether to change a long-standing policy of capping our current assessment rate at $1.82 per $100 in assessed value or pay the uncovered debt payments out of our general fund operating budget. 

We wrangled with a General Fund shortfall earlier this year to cover a budget deficit of more than $275 million.  By floating the assessment rate, your property taxes would adjust annually depending on the amount of debt the City must pay.  If we choose to keep the capped assessment and pay the debt out of the general fund, we would again be faced with cutting more city services.

You'd think that the City Council would decide to focus on how we solve this problem before we decide to go deeper into debt.  But that’s not the case. 

Despite knowing we must make more tough decisions on how to resolve this problem, last week a majority of the City Council approved an additional $8 million of debt by purchasing the Pioneer Living History Museum. I suggested continuing the decision until we know how to address the future shortfall in funds needed to pay debt service.  My colleagues disagreed.  After months of hearing about employee salaries and wasteful government spending, the budget deficit, employee concessions, implementing a food tax, cutting programs and laying off employees, they voted to go deeper in debt.

Bonds have not yet been sold for more than $272 million dollars in projects left from the 2001 and 2006 bond programs.  Many are critically important.  Each council member will have to choose which is the highest priority for his or her district.

The Pioneer Village was the top priority for District 1.  I understand that.  But, is it fiscally responsible to go deeper into debt when you haven’t yet determined how to pay for it?  Isn't that why we're in the economic down spiral?  Let’s buy it now and we’ll figure out how to pay for it later is not a use cause of caution.

Quite simply, we must address our debt problem before we approve adding more.  I am not one that leans to the far right or left.  I try to occupy the center ground with common sense.  It’s needed now more than ever because the consequences for Phoenix taxpayers could be severe.

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