Stephen Slivinski

Sewers vs. Sports Arenas

Posted on September 19, 2012 | Author: Stephen Slivinski
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When government issues debt, you probably think it’s paying for the construction of a highway or water and sewer improvements – the sort of things that we usually expect government to provide.

For almost a quarter of state and local government debt in Arizona, however, the bonds pay for projects that directly benefit private interests instead of the public at large. And none of this debt is subject to the constitutional debt limits, nor did voters approve much of it. 

The city of Glendale, Ariz. is a prime example of what can happen when government is not bound by constitutional debt limits. Over 40 percent of Glendale’s current long-term debt load ($475 million out of just over $1.12 billion in debt) goes to finance the hockey arena, the Cardinals stadium, hotel and retail centers, and subsidies to retail giant Cabelas. Glendale has used financing methods that keep its debt outside of the debt limits in the state constitution.

Repayment of the bonds is premised on the revenue that these projects are expected to generate from, say, well-attended hockey games or highly popular retail centers. But if that revenue never materializes, as has happened often, someone else will have to pay the bonds. Taxpayers are the likely target.

One way to protect the public’s money from special debt-financed subsidies to private interests is to put an overall cap on all government debt and to subject all local debt issuance to voter approval. These steps would require elected officials to make the case to voters that a bond to give subsidies to a sports team or a big retail corporation is more important than keeping open some of their bonding capacity for things like sewer improvements or public safety. When the trade-offs are so explicit, it’s unlikely that voters will approve letting local governments abuse their power to issue debt.

Learn More:

Goldwater Institute: Cutting up the Credit Cards: Seven Ideas to Reform the Culture of Debt in State and Local Government

Goldwater Institute: Debt and Taxes: Arizona Taxpayers on Hook for $66 Billion Tab Run Up by State, Local Governments

City of Glendale: Debt Management Plan

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