Ted Simons: Phoenix Mayor Greg Stanton appears on "Arizona Horizon" each month to discuss major issues facing the city. Tonight a look at the new city budget and the apparent end of pension spiking. Here now is Phoenix Mayor Greg Stanton. Good to see you again.
Greg Stanton: Good to see you. Hope you had a great Memorial Day weekend.
Ted Simons: And I hope you had a great Memorial time getting past that budget. Let's talk about the new budget, your thoughts because my goodness, knock-down, drag out but at the end it seemed like everyone just kind of went ahead and got it done.
Greg Stanton: Well at least five of us hung together to get the job done. We built a centrist coalition, we had to make some tough choices to get though this budget and we did get through the budget. And because of the tough choices we made, we're not going to cut senior centers, we’re not going to cut youth centers or swimming pools. A lot of the core services that people rely on, were protected in this budget and we did end pension spiking, as well. So I think, overall, I think the public can be very proud that the City of Phoenix acted responsibly and we passed a budget that we're going to be very proud of in the long-run and are going to protect the fiscal integrity of the City of Phoenix.
Ted Simons: We have city-wide workers repay in benefit cuts and four of the unions took cuts obviosuly this year, and next year with the fifth union fighting all of that. All of that was needed? It had to be done?
Greg Stanton: It had to be done. Look, the reality is that we are actually putting significantly more resources into employee costs this year than we did last year. The reality is that pension costs are up significantly, workers' compensation costs are up, and health care costs are up. So overall the amount that the city is putting into employee compensation is going up but in order for us to balance the budget we did have to ask our employees to sacrifice. And they did. And once again, our City of Phoenix employees, incredible people, incredible as a group, stepped up to the plate and did the right thing. Obviously we had the one labor organization representing the police officers who did not agree and the decision had to be imposed. I think the majority of us in the council stood up on the principle that we should not treat different groups differently. That the police officers shouldn't get a different deal than the firefighters that we should all kind of hang together. That was ultimately the principle that won the day. As tough as it is, it was the right principle for us to follow in moving forward.
Ted Simons: With that in mind, the first closed one in the city's history. Is there a plan B, if there's a legal challenge that succeeds, if there’s some sort of ballot measure that succeeds?
Greg Stanton: Sure, we have to balance our budget every single year. If they challenge us and they are successful, the city manager will have to propose budget cuts in order to balance our budget. Every single the year we balance our budget and make the appropriate pension payments. The City of Phoenix, despite all of the debate, and discussion, and headlines: the truth is that of the biggest cities in the country, we still have the highest credit rating. Our credit rating was just affirmed among the very best. Most were very complimentary of the fiscal management. We're a big city, we make headlines. There’s always going to be controversy with some of the decisions that we make. People watching at home can be confident that this group of council members this -- coalition made the right choices for the fiscal health of the city of Phoenix.
Ted Simons: I want to get to those bond rates in a second. We do have a tax on water meter size and the fee increases are relatively obvious. The senior centers, athletic fields, those kinds of things. What’s this business with the water meter size?
Greg Stanton: Well, first off, we have not voted on those revenue increases, however, we did, as part of the budget set-aside, about $11 million for a billion-dollar budget, not a significant amount, but still, we did make a decision if we were going to ask our employees to sacrifice, and we did, that we ought to be willing to get some political skin in the game with those that are willing to support the budget. So we did set aside about $11 million of what we’re going to have to do to fill that budget hole. We're looking at an amount on the water. We've had a two dollar fee on the water bill for a long period of time. We reduced it back down to a dollar fairly recently. The city manager has asked that we look at about $1.50 increase on the water bill. We're also looking at market rate pricing for parking meters. So that if you’re at a big sports event going on downtown the parking meter isn’t a fraction of the price of the parking lot 50 feet away, that we actually take into account market measures when it comes to pricing of that. By the way, most of the local downtown businesses and restaurants love it because they have customers that may not be going to the ballgame, but still are able to park in front of that restaurant and grab a meal, so it gets the car moving a little bit more if you will. So the positive thing for the downtown locally owned business community. Yes, we are looking at some of the charges that we do charge for use of the athletic fields, the electrical cost associated with it. Energy cost, etc. So overall, we need to hit about $11 million market to balance our budget.
Ted Simons: Councilmember Gates had some ideas, eliminate vacant positions, sell city-owned property, cut nonessential costs, lobbying, P.R.- those sorts of things. Make sense to you?
Greg Stanton: Well look, we are cutting hundreds of vacant positions. The 92 positions that the city manager asked us not to eliminate. We’re essential services of the city. We're talking about 911 dispatchers where there are open positions. We're talking about people keeping records management for the Police Department so we can teach track crime rates. We’re talking about victim’s advocates in our prosecutor’s office. So, look. Sometimes we get involved in sound bite politics where you say, “just cut all the vacant positions.” It may sound good but when you dig down, you dig a little bit deeper and we should, as leaders of this city. We should be smart about which vacant positions we do eliminate and which we don’t eliminate because it would eliminate core services that we have to provide. I think the city manager's recommendation did do that analysis. Try to avoid the sound bite of just eliminate vacant positions. And the question is, which vacant positions we should eliminate? He asked us not to eliminate about 92 or 93 positions. Ultimately the majority of the council agreed with him. Selling city property of course we should sell unneeded city property, we're in the process of doing that now. We don't want to be give away the store, we don’t want to be so quick about it that we end up selling so far below market rates that we don't do right by the people of the city of Phoenix. We have to be smart about how we go about that process and that’s exactly what we are doing currently end net, and that's exactly what we are doing currently. And by the way, lobbying and PR, look. We should not overpay for lobbying expenses but it's important that the interests of people of the City of Phoenix are represented down at the capitol. Believe it or not, they are not always friendly to the interest of the city and we have to make our case at the state capitol. We have to make our case to the federal government. There are a significant amount of grants and grant opportunities that Phoenix, we owe it to the people of Phoenix to make sure we get our fair share. So I'm supportive in making sure that we have the firepower necessary that we get our fair share of resources.
Ted Simons: So a difference of opinion as to what is essential and what may not be essential.
Greg Stanton: Of course, and by the way, selling a city property is obviously a one-time deal. You cannot use sale of property, one-time sale for long-term expenses. That would be bad practice, that would get us in trouble with the credit rating agency if you start to engage in practices like that. We have had a solid credit rating for as long as we’ve received a credit rating cause we have a strong fiscal manager practices and that is going to continue as long as I’m Mayor of the City of Phoenix.
Ted Simons: You brought up that credit rating again, let's get to it. The City keeps its double-A plus bond rating. First of all, explain why that's so important to the city, and then I want to know what the city can do, if it's even possible anymore, considering changing guidelines to get back to the triple A because it was knocked down in December. Is it ever going to get back?
Yeah, we got knocked down obviously because Phoenix and Las Vegas, more than any other major American city, got hammered with regard to real estate prices and the value of the real estate which is a big chunk of our budget. If you read their reports, they always give us very strong remarks regarding our fiscal management practices. The reality is we can stay as high as we are. There was a very nice article in the newspaper about Peoria upgrading their credit rating. Guess where they upgraded? To the level of the City of Phoenix. We're in a situation where the center city has a better credit rating than almost all of the surrounding cities with a couple of exceptions. That’s very rare across the United States of America. It allows us to borrow money at a reduced rate. So when we do bonding, when we do rearrange some of our debt, refinance some of our debt, we can do it at a much lower interest rate. It costs the taxpayers less, we can pay it off more quickly We can get back to refinancing or financing new projects: police stations, fire stations, etc. So it’s critically important that we have our credit rating as strong as possible.
Ted Simons: I know the councilman DeCicio said the credit rating will never get back to Triple-A if we continue to see the city using property tax reserves. Aren't property tax reserves being depleted? If so, what's that going to do for the credit rating?
Greg Stanton: To be frank, Congressman DeCicio, for the last several months has said that a downgrade of the city’s credit has been eminent. If I recall every meeting he would come and make this passionate case that the city’s credit rating was about to be downgraded. He was wrong. Literally at the exact same moment, he was making this gloom and doom argument is when we are being reaffirmed at the second highest rate possible with a very strong report record from both – complimenting the fiscal management of the City of Phoenix. The City of Phoenix is going to manage our resources well. We've done so with sales tax. We've done so with bonding and we've done so with the property tax. And our strong fiscal management our conservative policy is relative to management of the city’s fiscal House. It's always been in a very strong way and again, that’s going to continue with me as mayor. So, with all due respect, to any particular individual City Councilmember who suggests that the credit is going to be downgrading, presenting a very boom and gloom scenario, with all due respect, they were wrong and I am proud of the report that we got from both of those credit agencies.
Ted Simons: If you could mention rising pension and health costs, they seem to be growing more than revenue. Is it time to look at, to consider perhaps going to a 401k type of plan?
Greg Stanton: Since I've been mayor. We have made more pension reform in the history of the city of Phoenix. As you know, we did do significant pension reform. We asked the voters for support. 80% of the voters of the City of Phoenix said that our approach was the right way which means that employees, new employees of the city have to pay over three times the amount of existing employees. It's not an easy thing to ask, but it is the right thing to do. We also indicated we are going to eliminate pension spiking, that is not an easy thing to do, it's been in place for decades in the city of Phoenix. And as reported just today, We were successful in ending pension spiking in the City of Phoenix. We have to be careful that as we look at any additional pension reform, we don't do so in a way that's going to add significant costs to the city of Phoenix. We have to by state constitution; we cannot take away pension benefits that have already been given to employees. So we owe it those individuals who are already in the system as we look at an additional system, like a 401k which the city would oddly enough have to contribute to. If we are not smart about it, we could have a system having to pay for hundreds of millions in addition to the ongoing pension cost. We should always look at our pension system but we should be smart about how we're going about it. Let’s not go for this sound bite that ultimately could cost the people of the City of Phoenix hundreds of millions in additional costs. We have to make sure we're providing accurate information as we go through the process.
Ted Simons: You mentioned in the Arizona Republic paper of record, major paper here in the state. Editorial not too long ago, he blasted the councilmen for being far too divided. Blasted you and the councilman DiCicio together for not providing leadership and spending most of your time sniping at each other. Was that a valid opinion?
Greg Stanton: I could only speak for myself. If you ever watch how I handle the meetings you'll know that is simply not the case. I treat everyone with dignity and respect. One should know the facts about what is going on. In terms of saying negative things about people and individuals, the insinuation that I spend too much time -- is simply not true. I've handled this situation, obviously when criticism is coming my way; we’ve handled it with as much dignity and with respect because that’s what I owe the public. The reality is this; we had some very difficult decisions to make through this budget process. As you know, people have different viewpoints. I have some strong willed intelligent individuals on my council, I respect every single one of them and even if they disagree with me I respect them. What I had to do is put together a centrist coalition to get the five votes necessary to pass a very responsible budget and that’s exactly what I did. We put together a centrist coalition, we got the votes necessary, my goal is not to please every single person on the council. My responsibility as mayor is to do right by the people of the City of Phoenix and put together a coalition that allows me to do that. And we were successful in doing both of those through this recent budget cycle.
Ted Simons: With that in mind, last question. Are we going to see a repeat of all this next go-around? What is being done to figure out why those revenue projections were so wrong which led a $38 million the wrong way.
As you know, since that occurred last year, myself and councilman Gates have written a memorandum to the city manager asking that the whole process be changed. First and foremost, we're aware of the revenue situation in real time. Number two, that you prefer much more details as to the increase, last year it was %7, this year it was a revised %3 much more responsible number so far so good but as I come here as a monthly basis, I hope you invite me back, I’ll continue to update revenue numbers so that you, the public, everyone can understand exactly where we’re at in real time. We hire the city manager Ed Zurker, he’s doing a good job as city manager. By the way, he was unanimously supported by the council as the individuals to be the administrative leader of the city and I respect that he has taken my advice and revised the budget estimating process. I think you'll see better results in the future.
Your invitation stands, of course, see you next month. Good to have you here.