Glendale, Ariz. City Council last week approved an increase in the city's secondary property tax of 31 cents, to $1.68 per $100 of assessed value from the current $1.37 per $100.

The tax increase was the first stage in a two-year plan. A 30 cent increase is expected next year. The increase in the secondary rate brings Glendale's total property tax rate to $1.90 per $100 of assessed value.

Revenue from the secondary property tax is dedicated to debt service. City officials said the increase in the rate is needed to compensate for a decline in Glendale's revenues.

Glendale generated $29 million from the property tax in fiscal 2010, but revenues would fall to $15.7 million in fiscal 2013 without the higher rate.

Secondary assessed value totaled $1.3 billion in fiscal 2012, down 26% from fiscal 2011. A 14% reduction in assessed values is expected in fiscal 2013.

The additional revenue from the secondary tax will service Glendale's existing debt, said Sherry Schurhammer, the city's finance director. She told the council that no new bond projects are planned in fiscal 2013.

Councilwoman Joyce Clark said she voted for the increase because the city must meet debt issued for municipal projects. "There's not enough money coming in to pay the bill, folks," she said at the session.

The additional tax will be included in the property tax bill that residents will receive in October. Vice Mayor Steve Frate said he supported the tax increases because Glendale would have to make severe cuts in city services without the additional revenue.

"This isn't something that we're doing willy-nilly and not thinking this out," he said. "These are hard times."

On Jan. 20, Moody's Investors Service downgraded Glendale's general obligation bond rating to Aa3 from Aa2 and shifted the outlook to negative from stable. Three days later, Standard & Poor's downgraded the city to A-plus from AA and also provided a negative outlook.

Glendale has $202 million of outstanding GO debt and $266 million of second-lien debt issued through the Glendale Municipal Property Corp.

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