Glendale officials are increasingly delaying or abandoning the construction of certain city buildings and facilities, even though voters in recent decades have approved general obligation bonds worth hundreds of millions of dollars.
The city council, at its Aug. 25 meeting, voted to spend $5.85 million from G.O. bonds – intended for parks, streets, economic development, open space, trails and flood control – on debt service, rather than the projects for which those bonds were issued.
Vicki Rios, interim finance director, told the council the fourth-quarter budget amendment consisted of “cash transfers between various construction projects where bond proceeds were in those construction projects and they remained unspent.”
Municipal bonds are “similar to a family taking out a mortgage in order to finance a house. Just like a family, the city has basic necessities (infrastructure) like roads and office buildings, but usually does not have cash available for such major purchases,” according to the city’s 2015-16 budget book.
Rios told the council she checked with experts before recommending the transfer of funds. Cities primarily pay off their G.O. bonds with the property taxes they collect from local residents.
“After consulting with the city’s financial advisers and our outside bond counsel, it was determined that those funds, that were there and remained unspent, could be used to pay off the debt from those bonds,” she said.
The council voted a few months ago to raise local property taxes, which will yield the city $24.8 million this fiscal year, according to a March 24 presentation at a budget workshop, and could allow the city to issue bonds already approved by voters.
The city’s G.O. bond debt service this year is $24.34 million, its property tax revenue should increase 3 percent annually, and its projected G.O. debt capacity will be $167.24 million in 2016 and $194.5 million in 2017, according to its latest budget book.
The city likely needed to divert G.O. bond funds at the Aug. 25 meeting because the city annually transfers between $5 million and $6 million from property tax revenue into its general fund, rather than using that revenue for G.O. bond debt service.
When the city issues a G.O. bond, which is then purchased by investors, it typically has 30 years, from the date the bond was issued, to repay the amount it has borrowed, plus interest.
The council approved that transaction unanimously, just moments before delivering their concluding comments to the public. That decision was consistent with the city’s approach to capital projects since about 2008.
In 1999, City Hall asked voters to approve $411.56 million in bonds, according to a 2014 bond authorization document provided by city officials.
Between 2000 and 2010, the city issued $241.16 million of the amount that voters approved in 1999.
Since then, the city has not issued any general obligation bonds for capital improvement projects, according to an Aug. 26 email from city spokesperson Joe Hengemuehler.
“It was not uncommon for much lower bond issuances in this time period due to the severe economic recession,” he added in an Aug. 28 email.
The unissued bonds that were approved in 1999 include $50.53 million for open spaces and trails, $32.63 million for economic development, $24 million for government facilities and $13.72 million for a cultural facility.
The 2015-16 capital improvement plan (CIP), approved by the council during the recent budget cycle, commits the city to spending zero dollars in each of those categories between 2015 and 2020. Each CIP is designed to last a decade.
The scheduling of capital projects by the city has to take into account strategic goals and revenue streams “without jeopardizing its ability to provide routine, ongoing services and one-time or emergency services,” says the budget book.
A comparison of the latest plan with the 2005-06 CIP indicates the city has delayed or abandoned its plans for a citywide trail system linking parks, development downtown or along Loop 303, additional office space for city operations, and a performing arts center.
The question of an arts center came up recently at a March 9 meeting of the Parks and Recreation Advisory Commission, during an exchange between John Faris, a commission member, and Erik Strunk, director of community services.
Faris asked why “the fine arts facility that was passed by the voters in accordance with a bond issue … was not yet built or acquired.”
Strunk told him “the bonds were never sold in order to generate the funding,” according to the meeting minutes.
Some of the bonds approved by voters have been issued and spent on capital projects with few, if any, obstacles.
A couple bonds approved by voters in 1999 are slated for capital projects this decade. The latest CIP says City Hall will spend $11.14 million in landfill development and $1.93 million in public safety during the current fiscal year.
Since at least 1980, the city has almost always exhausted the full authorized amounts in the G.O. and revenue bonds for its water and sewer systems, streets and parking, and flood control, according to ballot and bond documents released by the city.
The largest expenditure of G.O. bonds in the next five years will likely be a parking garage at Westgate. The city estimates that project will cost $46.4 million, but market rates for the 4,000 spaces the city has to provide suggest a price tag of $64 million.
Of the $79.07 million for a streets and parking G.O. bond that voters approved in 2007, the city has not yet issued $67.24 million.
Certain capital projects became a lower priority when the Great Recession began and revenues started declining. City officials began talking about delaying construction of the new courthouse and a branch library in western Glendale.
Joyce Clark, who was serving on the council then, discussed that possibility during an Aug. 26, 2008, council meeting.
“She said her concerns were not if they would be able to construct both capital improvement projects, but rather that they may not be able to afford the operating and maintenance cost,” according to the minutes from that meeting.
That proposal surfaced again during a March 30, 2010, budget workshop, when the council discussed changes to the city’s capital improvement plan.
That CIP plan anticipated “the remaining portion of the new municipal court project moving to FY 2015, and the west area library moving from FY 2014 to FY 2015,” according to the workshop minutes.
In 1999, one of the questions approved by voters authorized the city to issue $64.8 million in G.O. bonds for fire and police substations, a new court building, as well as public safety buildings, equipment and vehicles.
Last November, the city changed its course and issued a request for proposals from real estate consultants who could sell the unfinished courthouse and other unused or underutilized city buildings.
The future of the court complex, which was supposed to split the caseload with the crowded municipal court near City Hall, looked much different a decade earlier.
The city purchased the courthouse property, at the southwest corner of Glendale and 47th avenues, for $3.6 million in 2004.
“Construction started in early 2009 and halted in August 2009, with underground utilities and a portion of the basement parking area completed at a cost of $10 million,” says the RFP.
By June 2014, the city had spent all but $1.84 million of the $64.8 million approved in 1999. Voters approved a similar question in 2007, which included a new court building and public safety buildings, but the city has issued none of the $102.64 million authorized.
City officials decided in recent months to move in a different direction.
DTZ, a national real estate firm, was awarded a contract, during a May 12 council meeting, to prepare certain city buildings for sale.
The firm’s initial report on market prospects for those buildings was due 60 days later. The report was supposed to be presented to the council no later than Sept. 15, but the new deadline is Oct. 6, according to July 15 and Aug. 26 emails from city officials.
The long-awaited branch library in western Glendale will probably not be built with any voter-approved G.O. bond funding.
The latest CIP, approved a few months ago, says the city will spend $11.59 million, by issuing a bond between 2021 and 2025, on renovation of its three existing libraries, rather than the construction of a new branch library.
Voters approved a bond in 1987 that authorized the city to issue library bonds worth $9.7 million. The city has not used the $1.7 million remaining amount.
“If there are library projects in future CIPs, and they fit within the 1987 ballot question, and we choose to finance the project with G.O. bonds, we would then use the 1987 authorization,” said an Aug. 28 email from Hengemuehler.
The 1987 language does not explicitly discuss a western library, but it does authorize the city “to acquire land and interests therein as necessary for library facilities.”
A recent presentation to the Library Advisory Board on five options for library services in western Glendale made no mention of utilizing those voter-approved funds, this fiscal year or next.
Strunk’s recent summary of that Aug. 8 library board meeting, in an Aug. 28 email, was silent on the question of bond funding.
When residents voted in 1999 to approve bond questions, they authorized the city to issue $15.4 million in bonds for libraries. That presentation makes no mention of plans for the excess $3.81 million, which, according to the CIP, is not needed for future renovations.
The first purpose that voters read in the 1999 library bond question was “planning, designing and constructing new library facilities.”