DALLAS - Moody's Investors Service restored its outlook on Glendale, Arizona's A3 rating to stable from negative, citing improved economic conditions for the city that went heavily into debt for professional sports.
"The city's operating funds remains in a weak position but are showing continued improvement and maintain solid liquidity," analyst Patrick Raymond Liberatore wrote in Moody's Sept. 30 report. "Recovery from the recent downturn is also benefitting operating tax revenues, and the still large tax base is expected to continue rebounding."
Glendale officials hailed the new outlook.
"This validates the actions we've taken over the past year and this accomplishes the first step in stabilizing the city's financial condition," Glendale city manager Brenda Fischer said in a prepared statement. "We look forward to continuing this fiscally responsible direction with the support of the city council, employees, residents, city partners and the business community."
In March, Standard & Poor's downgraded Glendale's general obligation bond rating to BBB-plus from A-minus based on the agency's new criteria, and retained a negative outlook. However, on Sept. 25, S&P affirmed its AA ratings on Glendale's series 2007 transportation excise tax revenue obligations.
The Moody's action affects $963 million of outstanding Glendale debt.
To balance its budget, the city enacted a sales-tax increase that was challenged in court and led to an unsuccessful petition drive to repeal the increase. Under Arizona law, the opponents of the tax cannot petition for another referendum until 2016.
"The city's now permanent sales tax rate increase to a 1.9% rate from 1.2% will continue to provide more revenue to support operations and excise tax secured debt, following failed civil suits and an unsuccessful voter initiative," Liberatore said.
Glendale's fiscal straits came after the city was hit by the 2008 recession after issuing nearly $388 million of bonds for the Phoenix Coyotes National Hockey League arena and a spring training facility for Major League Baseball's Los Angeles Dodgers and Chicago White Sox.
The spring training facility known as Camelback Ranch was expected to lead to a major development known as Main Street, but the project's promoters went bankrupt and the land went into receivership. An anticipated $1.2 billion bond deal for the project was called off.
"Glendale's Office of Economic Development continues to field calls regularly from investors and others interested in this highly desirable area of Glendale," Watters told The Bond Buyer.
The hockey arena left Glendale on the hook for $180 million of sales-tax backed debt for 30 years.
But the Coyotes filed for bankruptcy and announced plans to sell the team to a buyer in Canada.
To keep the team playing in Glendale, the City Council approved subsidies of about $15 million per year, offset by $6.8 million of revenues coming back to the city.
When other Arizona cities rejected any tax support for a new Arizona Cardinals stadium, Glendale agreed to let the Arizona Sports and Tourism Authority build the stadium near the Coyotes' arena with state tax revenue. Glendale issued general obligation bonds for roads and related infrastructure at the stadium site.
The city is hosting the 2015 Super Bowl Feb. 1.
According to a study by Elliott D. Pollack & Co., Glendale spent $3.4 million hosting the 2008 Super Bowl and the event generated $1.2 million in city tax revenue from direct visitor spending. The study also found that $11.3 million in tax revenue went to the other cities in Maricopa County.
The Cardinals have since threatened to sue the city for failing to provide adequate parking for games at the stadium.
When asked about Glendale's financial straits, Cardinals President Michael Bidwill last month dismissed the concerns in an interview with The Arizona Republic: "They got themselves in a financial dilemma with other sports facilities. They just didn't do a good job of planning these things."
