Letter: Take a ride on Cottonwood's fiscal merry-go-round
As you're probably already aware, in the past the city has pushed all of its water bond debt service onto its 9,000 water bill payers and always kept their biggest bond debts off the city's liabilities.
For this reason, 67 percent of the city water utility's bond debts today are being paid by outside water bill payers who have no vote or rate supervision after the city raised water rates in the Verde Villages and Verde Santa Fe 33 percent higher than city residents pay for the same water.
Enter the city's new $18 million bond, which will be guaranteed by the city's sales taxes and state-shared revenue.
At Cottonwood's May 19, 2015, city council meeting, the city's bond brokerage consultant, Grant Hamill of Stifle (Phoenix) said the city's new $18 million bond would not be guaranteed by the water or wastewater bill payers (implying the city's water utility's credit score is too low to obtain capital from the public markets) and will be instead be guaranteed by the city's sales tax revenues and state shared (tax) revenues.
This marks the first time since 2004 the city was unable to issue a municipal revenue bond guaranteed by revenues from the water utility and must be paid by city sales tax revenues. Even Cottonwood's Recreation Center GADA bond is being paid by the city utility's 1 percent TPT sales tax, which is levied on the base charge, consumption/volume, and the fees.
Following that meeting the city began its Fiscal Year budget planning and is planning the following expenditures:
The city's 2016 Proposed Fiscal Budget is not to exceed $117,086,020.00 -- this is an increase of almost $39 million over the city's 2015 budget! The city's expenditures probably include the new $18 million bond (to be issued within 4-5 weeks) using the city's credit rating, and not the water utility's low BBB+ (S&Ps) or Moody's credit rating, which could be A or A-?