S&P Dims Outlook on Glendale, Arizona’s Sports Mecca

DALLAS — Standard & Poor’s has revised its outlook to negative from stable on Glendale, Ariz.’s general obligation bonds.

The new outlook on the Phoenix suburb’s AA rating “reflects our view of the city’s continued drawdown of its reserves in order to balance its budget,” wrote analyst Alda Mostofi.

Since 2009, the city’s general fund revenues have been on a declining trend, decreasing by about 12% and 5% in fiscal 2009 and 2010, respectively, to about $140 million, according to Standard & Poor’s. Officials attribute the decline in Glendale’s state-shared revenues and motor vehicle revenues to lower consumer spending.

“We expect that the city’s economy will likely ultimately stabilize, allowing for continued strong levels of financial reserves,” Mostofi noted. “However, if the economy continues to weaken, and financial reserves decrease substantially, the rating could be lowered.”

Moody’s Investors Service still has a stable outlook on Glendale’s Aa2 GO rating.

The Standard & Poor’s outlook change comes as Glendale seeks an owner who will keep the Phoenix Coyotes National Hockey League team playing in the Jobing.com arena that was built with $180 million of city bonds.

Without the Coyotes as the major tenant, the arena would see its bookings fall dramatically.

The arena bonds are supported by sales tax revenue and would not be at risk of default if a new owner were to move the Coyotes to another city, most likely in Canada.

However, the loss of the NHL team would affect the city, which receives revenue from ticket sales that it uses to offset debt service, according to rating analysts. The city has also agreed to pay up to $25 million of team losses while the Coyotes play in Glendale this hockey season.

“The loss of the team and its related revenue-generating activities in the retail development surrounding the arena would put unwelcome pressure on the city’s financial operations, which are already experiencing revenue declines due to the recession,” Moody’s analyst Patrick Ford noted in a May 7, 2009, special comment.

“Moody’s is closely monitoring developments relating to both the team’s potential departure and the city’s financial position and will comment further as ­warranted.”

The arena was financed with the 2003 issuance of $155 million of excise-tax revenue bonds and $25 million of GOs. The revenue bonds carry ratings of Aa3 with a stable outlook from Moody’s and AA from Standard & Poor’s.

With a population of 244,700 in the northwest portion of the Phoenix metro area known as the West Valley, Glendale has become a professional sports mecca, with the Arizona Cardinals stadium built adjacent to the Coyotes arena. The city has also built two spring training facilities for Major League Baseball teams.

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