Facing a dramatic downturn in property valuations, the Phoenix suburb of Glendale is considering restructuring some of its debt to ease growing fiscal stress.
Under its proposed budget for the 2011-12 fiscal year beginning July 1, the city is trimming its capital improvement program after years of aggressive growth.
The $49.6 million plan covers mostly upgrades and maintenance of existing facilities.
One project begun in 2008, a $44.7 million court building, has stalled due to lack of funding, officials said.
Revenue from the secondary property tax that is used for debt service is $3.1 million short of what is needed, according to city officials.
Next year, the gap is expected to grow to $6.4 million. Glendale is tapping its rainy-day fund to cover the spending shortfall.
Declining property values have hit the city hard. Secondary assessed values used for debt service are expected to fall nearly 50% next year to an estimated $1.1 billion from a high of $2.2 billion in fiscal 2008-09.
Glendale’s secondary tax revenue has dropped to a projected $15.5 million for fiscal 2013 from $29 million in fiscal 2010.
Meanwhile, the city is struggling to keep the Phoenix Coyotes of the National Hockey League playing in the city-owned Jobing.com arena.
Plans to issue debt to finance the team’s sale have been stymied by threats of a lawsuit from the Goldwater Institute, a conservative taxpayer advocacy group.
Loss of the Coyotes franchise would leave the arena vacant for much of the year, costing the city more sales tax revenue.
Standard & Poor’s in February put Glendale’s certificates of participation on negative watch as the city prepared to issue $100 million of debt to help a private investor buy the Coyotes.
Glendale’s COPs remain at AA-plus on the Standard & Poor’s scale, but the negative watch indicates a possible downgrade in the future.
The agency’s action followed a downgrade by Moody’s Investors Service to Aa2 from Aa1 on Glendale’s general obligation rating.
