Scottsdale November GO bond ballot question appears imminent

Residents can make public comments during city council meetings at City Hall, 3939 N. Drinkwater Blvd. (Independent Newsmedia/Josh Martinez)

Its name is bond — Scottsdale general obligation bond.

Scottsdale City Council appears poised to pursue a $350 million general obligation bond measure next election day — Tuesday, Nov. 6 — on the heels of an hours-long discussion earlier this week. The pursuit, city officials say, is a culmination of understanding the dire straits of local infrastructure in certain pockets of the municipality.

There are 118 Scottsdale infrastructure projects city leaders have identified carrying an estimated cost of $810 million, but elected leaders readily admit municipal needs exceed existing funding sources and mechanisms.

In summer 2017 three members of Scottsdale City Council were tapped to lead an internal subcommittee to better understand both the infrastructural needs of the day and — more importantly — how to raise dollars and cents for municipal projects.

The Scottsdale Capital Improvement Plan Subcommittee is charged with presenting the larger governing body with both a recommendation for a list of priority projects to address infrastructure needs this coming fiscal year and marching orders for the next five years.

On Tuesday, March 27 those recommendations were fine-tuned and potential funding mechanisms were discussed at length at City Hall, 3939 N. Drinkwater Blvd.

Scottsdale City Council members Virginia Korte, Guy Phillips and David Smith serve as liaison between the governing body and the CIP subcommittee, which is also comprised of Scottsdale department leadership.

Infrastructure needs top the list of priorities for elected leaders of Scottsdale. (File photo)

The brass tax

Scottsdale City Engineer Dave Lipinski introduced Scottsdale City Council to the current state of affairs regarding capital improvement projects identified and the price tag for those projects.

In addition, much of the initial conversation defined what can and cannot be funded through a general obligation bond, a sales tax increase remedy or a combination of the two.

“There has been some changes from when this process started,” he said of the fluid nature of developing a CIP list for public examination. “In total, after the requests within the CIP; if those are moved forward, it leaves 160 projects and a total of $639 million in unfunded requests — that is where we start today with the different scenarios.”

Mr. Lipinski explained to council city staff has developed three different funding scenarios to address infrastructure development needs identified by local leaders. They are:

  • A series of sales tax incremental increases totaling .1 percent, .2 percent and .3 percent;
  • A $350 million general obligation bond sent to voters this November; and
  • A hybrid funding approach whereas the city would institute a .1 percent increase to the local sales tax rate and pursue a $350 million general obligation bond measure.

Much of the conversation revolving around various sales tax changes — today the rate is 1.65 percent of which .3 percent is dedicated to land acquisition for the McDowell Sonoran Preserve — and the prospect of abolishment of the tax on food.

City leaders speculate the sales tax on food accumulates about $12 million annually.
Scottsdale City Council in March 2016 voted to take 1.1 percent of the 1.65 percent retail sales tax assessed on all grocery sales within city limits and funnel those dollars into the capital improvements budget forecast.

A defined path to funding

One member of council brought his own PowerPoint presentation to illustrate his approach to generate funding to help pay for failing infrastructure.

Guy Phillips

“When I was first asked to be in this subcommittee, my first reaction was they want me on this subcommittee to convince me we need to go for bonds,” he said at the onset of his comments. “And I thought, well if that’s the case, good luck, but I said I am willing to learn and see what happens. Personally, I have learned a lot.”

Mr. Phillips offered the idea of a series of stepped-up sales tax increases for a three-year period and then, the potential for a general obligation measure coming after fiscal year 2020.

“I wanted to think of the best ways to go about things,” he said pointing out his reticent thoughts on the pursuit of a bond program. “(Last time we discussed this) when council was 6 to 1 for bonds, I felt like I was on a sinking ship. I think we need to think about this strategically — it’s more about talking about how we go about doing it.”

Mr. Phillips says he wants to take a segmented approach to funding public infrastructure projects.

“Residents are equally divided on how to be taxed,” he said.

“Not all taxes are created equally, I believe bond uses should be for the big projects that will never get done without a bond. That makes sense. With that in mind Scottsdale has the lowest sales tax rate in the state. If you take out the Preserve, which is a bonded tax, by the way, on a sales tax — if you take that away, we are at 1.3 (percent), which is the lowest in the state.”

Mr. Phillips explained to council, through a public records request, between 2008 and 2012 a total of 14 Scottsdale residents lost their homes due to property tax-lien foreclosures.

“Resident can lose their homes. The tax never stops. You can say it’s only $37 a year, and yeah you can say that, that’s not that much, but it is over the life of the bond. Property tax sometimes gets to the point where people just can’t afford it. Sales tax is a good solution, in my opinion,” he said.

“I am asking for a modest increase in the local sales tax.”

David Smith

Mr. Smith, who also served on the CIP council subcommittee, say he found value in Mr. Phillips’ presentation, but points out a bond program is the right fit for the needs of the municipality.

“Obviously, I have a great deal of symphony for any proposal that talks about getting rid of any of the inequities in our sales tax,” Mr. Smith said following Mr. Phillips’ presentation.

“Particularly, the inequity of charging (a tax) for the food purchased at the grocery store. I obviously applaud anything that says ‘let’s get rid of that one way or another.’ I prefer the (general obligation) bond very simply because it is tied to the projects.”

Mr. Smith also points out, as it was discovered a few weeks earlier by City Treasurer Jeff Nichols, bond debt in Scottsdale will be paid off in coming years allowing for the potential of limited costs for home owners.

“It won’t increase the property taxes of people; we can honestly tell them that,” Mr. Smith said. “It won’t go up for any reason — in all likelihood it will go down. So, I think it is a compelling story to tell the people.”

For Mr. Smith the time for action is now.

“We have, in my judgment of course, waited too long already,” he said. “I am anxious to go to the voters. It is a progressive tax. I do favor the general obligation bond. It gives us the lowest cost. It gives us the best way to fund the projects, but I am sympathetic to the idea, I will call it: tax reforms.”

Marching orders

Scottsdale City Council is expected to see a general obligation bond proposal defined with projects and associated costs in April with a formal measure emerging in May, according to Mr. Nichols, the city treasurer.

“I have not wavered from my support for (general obligation) bonds,” Scottsdale Vice Mayor Virginia Korte said during the study session discussion.

Virginia Korte

“I go back to 1989 when we were able to pass about a $330 million GO bond measure and being co-chair of the campaign, I remember how the city and leaders rallied around that bond and we were able to build senior centers and build the new stadium, which is now an old stadium.”

Ms. Korte says the needs are there and the public realization seems to be materializing as well.

“We did some really good quality things with that vote — and we can do it again,” she said.
“The GO bonds are the most transparent of any funding source. Projects are defined; there is a beginning and end to that tax. The cost of debt is the lowest of any funding source.”

Scottsdale Mayor Jim Lane says he too supports the pursuit of an exploration of a bonding program for the city of Scottsdale.

“My primary concern and, frankly advocacy for general obligation bonds, is we do pay off our debt,” he explained. “It’s not we are sitting on something and refuse to pay it, as sometimes we are accused of. It is always being paid off as a matter of course by the revenue streams that are assigned.”

Furthermore, Mr. Lane contends when the bond is done, the debt is paid in full.

“General obligation bonds are a selection by the public to be taxed — they automatically sunset,” he said. “Once it’s done it is done.”

Jim Lane

Northeast Valley Managing Editor Terrance Thornton can be contacted at tthornton@newszap.com

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