There’s a bit of misinformation floating around that should be cleared up.
Coyotes and Glendale Payments
The following from a local blog:
The Coyotes payment of $1M bond and the city quarterly arena management payment of $3.75M are linked together and are to be paid concurrently. Neither has been paid to date.
The Coyotes paid the bond increase the day after the judge ruled. The City of Glendale made their required payment on time on the first.
Wrong Date and a Clearly Incorrect Statement
The following from a local blog:
It resulted in a City council approved Resolution 4943 New Series on May 26, 2015 making the inter-fund transfers to the Enterprise Funds permanent.
If you go searching Glendale records for that resolution on May 26, you’ll come away disappointed. The date the resolution passed was April 14, 2015. The agenda item is 15-237, here’s the text of the resolution:
SECTION 1. That the City Council hereby authorizes that the amount of $39,276,250 recorded in the City of Glendale general ledger as an “Advance from Other Funds” to the General Fund and as an “Advance to Other Funds” in the amount of $14,771,250 in the Water and Sewer Enterprise Fund and $20,584,200 in the Landfill Enterprise Fund, and $3,920,800 in the Sanitation Enterprise Fund be reclassified as a permanent transfer of $14,771,250 from the Water and Sewer Enterprise Funds. $20,584,200 from the Landfill Enterprise Fund, and $3,920,800 from the Sanitation Enterprise Fund all to the General Fund.
The statement that the resolution makes inter-fund transfers to the enterprise funds permanent is incorrect. In fact, there is no mention of transfers back into the enterprise funds to repay the amount pulled out to pay the NHL fees.
Obligation to Pay
Related to the same topic:
They did not dismiss their obligation to pay this debt.
Technically, the debt was self-imposed by a prior set of councilmembers. So, technically, the City NEVER had an “obligation” to pay back the enterprise fund. The fact is, however, promises to repay the debt WERE made and now repayment is completely optional.
During the March 17 budget workshop, Interim Assistant City Manager Duensing states:
What this transaction does is completely takes it off (the books).
Completely off the books. Yes, the council decided to pay $600,ooo this year instead of the $1.1 million originally planned (June 1, 2012 AZ Republic article):
Glendale begins reimbursing the first $25 million payment next budget year at $1.1 million for 25 years.
Duensing then clarifies that the $39.5M will not be tracked anywhere in the budget. When questioned as to, if repayments were being made, how the City would know when to stop repaying the enterprise funds, Duensing replies:
We would never know.
Bart Turner, during the same March 17 budget workshop:
The commitment is based on the character of the council, this one and future councils.
We’ve covered this before, but at 2:04:30 in the 03/17 budget workshop video, Councilmember Tolmachoff asks Duensing for clarification:
Mr. Duensing, now the way I understand it is basically this would remove the obligation because it’s no longer classified as a loan therefore no longer an obligation, it can’t be recorded anywhere that it’s an obligation or debt of the City.
Duensing replies in the affirmative and CM Tolmachoff continues:
So, basically in order for the money to be paid back to the enterprise fund you would need, because it’s a 22 year amortization remaining on the loan, you would need a commitment every year for 22 years from a council that far into the future in order for the enterprise fund to be made whole?
Duensing replies in the affirmative.
The “analysis” text supporting resolution 4943 includes:
Council may elect to continue to appropriate or not appropriation transfers from the General Fund to the Enterprise Funds to support their operations each year as part of each fiscal year budget process. Future transfers would not be recorded in the general ledger as principal and interest payments remaining inter-fund advance balances would not be recorded in the annual financial statements.
The fact is, not only is there is no obligation to pay “this debt”, the debt to the enterprise funds no longer exists.
Nobody debates the beneficial effects of this move on bond ratings, the question of breaking promises made to the people of Glendale about repaying the enterprise funds remains.