By Wayne Schutsky for Scottsdale Progress
As Scottsdale city leaders grapple with the financial implications of the coronavirus crisis, they also are weighing whether or not to delay infrastructure projects connected to the $319M bond approved by voters last November.
The city has already approved some smaller bond projects — including some needed fire department expenditures — but was planning to spend the bulk of bond proceeds over the next five years.
But during a hearing on next year’s city budget, Councilman Guy Phillips suggested delaying bond projects amid the economic uncertainty created by the Covid-19 pandemic.
An early draft of the city’s next budget presented to City Council showed it allocating $241.5M from the 2019 bond between 2020 and 2025 — including about $36M over the next 12-18 months to fund portions of 30 projects.
Then the coronavirus hit, forcing the city to reckon with potentially devastating economic consequences as it confronts significant drops in major revenue sources like sales tax, which comprises about 42 percent of the city’s general fund revenues.
The pandemic has devastated the city’s tourism industry, which accounts for around one-third of the city’s economic output, Mayor Jim Lane said.
Lane said there have been discussions on how the current economic downturn will affect bond spending but that “there hasn’t been a final line on this.”
Scottsdale City Engineer Dave Lipinski said that budget presented on April 7th had been prepared prior to the pandemic and could be changed in the coming weeks.
Delaying bond projects could make sense if the city takes a significant hit to revenues so that city can avoid taking on additional debt.
“Issuing a bond means committing to making expenses…when you talk about committing to additional expenses that you don’t absolutely have to do right now, that may not make sense,” said Akheil Singla, an assistant professor at the School of Public Affairs at Arizona State University.
Scottsdale officials will have to weigh whether or not the cost of delaying bond projects — some involving essential infrastructure — outweighs the risk posed by spending in the face of an economic downturn.
Singla said Scottsdale is heavily reliant on sales tax revenues, meaning it will likely be hard hit by the current economic downturn that has been driven by the shuttering of businesses that generate that tax revenue.
Singla said it was probably actually cheaper for cities to borrow money in February before the coronavirus took hold in the U.S. than now, because the number of institutions willing to give cities loans has fluctuated over the past six weeks due to the current economic uncertainty.
But Lane said there are reasons the city may decide not to delay projects, including the potential to save on construction costs during the downturn.
Read more at Scottsdale Progress.