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Vista 2030 and Taxpayer Debt

The Goldwater Institute reports that Arizona state and local governments owe $66.5 billion in
outstanding debt and unfunded obligations. Most of this debt, $44 billion, is in municipal
bonds, which are issued for capital improvements, while $938 million is held by Municipal
Property Corporations, who loan funds for properties, and are repaid by lease payments until
the debt is retired. Additionally pension funds are underfunded by $13.6 billion. Simply stated,
funds paid into retirement plans will not cover the amounts needed to be paid out to retirees.

How did this happen?

Government entities need funding to function, and this funding is provided through various
taxes. When something above and beyond everyday operations is needed, other sources must
be found.

Generally, when these needs are identified and costs estimated, the government has the option
of setting aside monies for the project (pay as you go) or getting voter approval to go into debt
by issuing bonds. This provides immediate funds for the project, and payment is made over
time, usually from property tax revenue. Arizona sets limits on bond issue debt based on
assessed property values and required voter approval.

A government may form a Municipal Property Corporation, which acts as a funding agency, but
does not have the lending amount cap, or the need for voter approval.

The problem of underfunded pensions is complex.

Arizona has four state pension plans and all state employees and their employers pay into
them: public safety personnel (police and firefighters), corrections officers, judges and elected
officials, and general state employees and teachers.

Pension calculations are made by taking present value, estimating its investment growth over
time and comparing it to the benefits that have to be paid. While investment growth has
varied, it has been less than estimated, and a conservative estimate of the shortfall, or
underfunding is $12.5 billion. Added to this are underfunded health benefits of $769 million.

How does this debt affect local residents?

Sierra Vistas Comprehensive Annual Financial Report (CAFR) can be found on line at
www.sierravistaaz.gov; this report shows an outstanding long term debt of $42,134,047 of
which $35,629,609 is the actual debt and $6,504,438 is interest. Of the $35,629,609,
$23,320,000 is debt owed to the MPC and paid by sales taxes, and $12,309,609 is held in notes
payable and funded through user fees for sewer, refuse, airport and HURF (Highway User Fnd
Recovery) as well as the general fund.

Additional long term liability is shown in Public Safety pension funds. The police pension fund is
underfunded by $1,007,849 and fire fighter pensions by $731,542. The shortfall has increased
each year.

Sierra Vista voters are now being asked to approve a dream city. Arizona requires cities,
counties and municipalities to prepare a strategic plan. A city the size of Sierra Vista is required
to provide seven items or Elements. Vista 2030 has added ten additional Elements. It is
laudable that voters were invited to provide input for the plan. It is unclear how many people
participated in the plan, but given the city population of 45,129, if people 500 took part, it
represents only 1% of the population; 1000 participants would equal 2%.

The 17 Elements included in Vista 2030 are good ideas, and would serve our city well, but there
are neither costs nor priorities assigned to the any of the elements!

Yet, without Vista 2030 ballot approval, the city council, in its September 9, 2014 work session,
began discussions on a city center, Element 17-4. Not only did they entertain the city center
concept, but expanded the vision to include a Gateway project. Land for the city center, if
located near Veterans Park, is state land and could cost an estimated $5 million dollars.
Remember, thats land without any improvements.

Given the amount out long term debts to the city, is it prudent to approve a city vision
without associated costs? Remember that the city can fund projects through the Municipal
Property Corporation without funding limits and voter approval. Do you want your dream to
become a taxpayer nightmare?

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