Pusch View Golf: "In For a Penny. In For a Pound."

In for a penny. In for a pound.” 

The expression "In for a penny, In for a pound" means that if you have already committed to doing something, you might as well go all the way and fully commit to it, rather than holding back. That is exactly what the Oro Valley Town Council did last week.

Council approves "Hole 7" bridge replacement...“

Faced with a staff created "emergency," last week the council approved a bridge that will cost  $390,000 for the Pusch Ridge 9-hole golf course. This is the same course they narrowly (4-3) voted to keep operating in February.  As we reported last week, the "emergency" was created by town staff's failure to personally inspect the facility before the council decision to keep the course open. It was a complete mess-up on the part of Town Manager Wilkins and his staff. 

Council rejected staff’s solution

The approval of the bridge replacement is a rejection of the staff’s less costly recommendation in two respects. First, the staff had recommended that the bridge be removed and a walk around through the wash and up the hills be implemented. In addition, the staff wanted to also replace some irrigation piping in doing this. However, the Council approved replacing the bridge. There will be no replacement of irrigation.

Second, staff had recommended that the funds for this project be taken from the general fund of the town. However, the council approved taking the money from the "community center" fund, which has separate sales tax funding. Town staff projects that the balance of the community center fund will be $1 million at the end of the fiscal year after this expenditure.

Staff insisted. If you want this bridge you must replace it... not repair it.

The reason the council approved replacing the bridge is that there is no way for town staff to determine what it would cost to repair the bridge. This is because the “bargain" that the town got when it purchased the golf courses in 2016 didn't come with any documentation on the construction of that bridge, or any other bridge on that course, or the irrigation that exists on the course today. So there was no way for staff to determine if the supports would work with a repaired bridge. 

Staff rejected the recommendations of residents who spoke at the meeting. According to staff, none of these considered the fully installed cost or the strength of the supports.

$390,000 in the "blink of an eye" won't come so easy in the future....

The town has been spending a tremendous amount of money on parks. It has been flush with cash since it bonded $25 million in funds for parks and received tens of millions of federal dollars for other uses. Those days are past. The 2025 budget will show some of those leftover monies but the majority of town funding will have to come from ongoing revenue sources. And we expect budgets will get tighter as time goes on.

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Parks and Recreation Projects Dominate Initial Cut At Oro Valley 2023-24 Capital Improvement Program

2023-24 Oro Valley Capital Budget-first cut- is almost $47 million

This Wednesday, the Oro Valley Town Council will study a $46.9 million capital budget for fiscal 2024. It is the largest capital budget (CIP) in Oro Valley history. Significant capital spending is being driven by the requirement to spend Parks Bond Funds and Government ARPA funds within the next few years. The result is that much of the spending is on parks and recreation and on water projects.

Parks projects are almost half of all spending

There are twenty-one proposed parks and recreation type projects that total $22.9 million. Two-thirds ($15.1m) of this spending is for continuing the buildout of Naranja Park. Even with this investment, future year capital investment plans call for continuing to add to and improve this facility with two additional fields, restrooms, and an asphalt roadway.  Other proposed parks projects for 2024 include doing the LaCanada Golf Course irrigation at a cost of $2million and adding a $1.7million elevator to the Community Center.

$12 million in proposed water related projects to add efficiency and operating flexibility

There are fifteen proposed water projects that focus on the operations and maintenance of the water utility. These are investments in the the storage and distribution of water. Generally, the cost of each project ranges from $100,000 to $200,000. These estimated total cost of these projects is $2.2 million. Generally, this cost stays the same for each of subsequent nine years. 

There is an added $10million in capital investment that appears to be for one-time projects such as the expansion of the booster station on La Canada ($3.7 million) and continued spending to bring water directly from Avra Valley to Oro Valley (NWRRDS). This will allow the town to reduce its dependence on Tucson Water for getting the town's CAP water allocation. We are guessing that the $5.4 million in ARPA funds are being used for the NWRRDS project.

Proposed spending to keep Oro Valley's roads the best in the county

Oro Valley's roads are the best in the County.. probably in the State. The proposed capital budget would spend $6.2 million on roads. A third of this is spending on the town's pavement preservation program. Also, there are several proposed pavement overlay projects, one road reconstruction and "annexation promised" road improvements at Westward Look.  There is also a budget item of $750,000 for "something" to be done at the very busy Rancho Vistoso and Woodburne Ave intersection  (perhaps a traffic light?).

Remaining capital improvement spending is primarily for public safety

There are two other areas of proposed capital spending. One area is public safety. There is proposed capital spend on an expansion of the town court office ($1.5 million) and on vehicle replacement ($1.9 million). The town court project is proposed to continue into 2025 for the same amount.  The vehicle replacement program also continues at about $2million annually for all of ten years included in the proposed CIP plan.

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Tonight… Council Focuses on Climbing Out Of The “Parks Bond Shortfall” Hole

Start Town staff: Cut Naranja Park and Path Spending
On October 9, Oro Valley Public Works Director Paul Keesler delivered bad news to the Council: Spending on the parks bond projects was going to be $18.2 million over budget. Keesler recommended specific cuts in spending. The counsel did not like what they heard so they asked Keesler to return to them with new recommendations. 

Keesler returns tonight with a plan  
Keesler will recommend relatively the same overall construct that he proposed a month ago: Slash spending on Narjanja Park amenities and on multi-use paths. We base this conclusion of our review of the “staff presentation” for tonight. 

Slashing spending in these two areas is the only alternative unless the Council authorizes more funding from town reserves. The town has already spent the parks bond money that was planned for the golf course and the tennis, courts. So, there really isn’t any other place to cut spending.

Reduce Naranja Park Spending by $12 million
Kessler’s plan reduces the scope of Naranja Park amenities:

• halve the size of the splash; 
• reduce the size of that the skate and pump track; 
• eliminate basketball courts; 
• reduce the number of pickleball courts. 
• change the type of paving for the streets and the parking lot; 
• and defer construction of two of the Multi-use fields. 

After already spending about $1million to level an area to relocate the dog park to the north end of the park, Keesler recommends leaving it where it is, thus putting the skate and pump track elsewhere

Reduce multi-use path spending by $3.4 million
Keesler recommends deffering the “CDO to JDK path extension”. That is the only parks bond project from which those who live south of the CDO got any benefit. Staff was able to identify outside sources for another planned path, thus saving money,

Still a shortfall of $3.1 million

Even when all of these changes or implementing, they’ll still be sure fall of $3.1 million. Keesler is recommending that the council use available reserves and park impact fees to try to cover most of that.

Tonight Council will decide how to climb out of the hole
The Council faces ugly choices. Perhaps they will solve the problem by covering the full $18.2 million shortfall with general funds dollars. Or, maybe they will elect to make other changes. We don’t know. 

We can tell you though that for 11 reasons we identified previously this Council, the former town manager, and town staff have put themselves in this hole and they’re going to have to figure out a way to get themselves out.

The Town's Planned Park's Projects For 2023

Investment summarized by facility

Yesterday, we posted regarding Town Manager Mary Jacobs recommended capital spending for fiscal 2023. We noted then that spending on Parks and Recreation is the centerpiece.

The $25million bond the town issued last September is the "driver" of the spending. That bond requires spending on Naranja Park, Municipal Golf and the Mult-Use Path system.

There are other projects, not included in that funding. This include refurbishing tennis courts and updating/correcting facilities at Steam Pump Ranch.

The following chart shows spending by facility:

Tonight, Oro Valley Town Council Focuses On Bonding $25 Million in Parks and Recreation Spending

A $25 million borrowing

The focus of the town council tonight is financing Parks and Recreation spending of more than $25Million over the next three years. Last night, the town’s Parks and Recreation Commission discussed what will be done and when it will happen [See Panel]. Tonight, the town council will review and likely approve the details of a municipal bond issue to fund $25 million in spending on these items.

It will be a challenging meeting because of the detail nature of the discussion. What follows is our synopsis of the key elements of the financing.

The money will be repaid over 20 years in annual amounts of $1.7 million per year. 

This assumes that the face interest rate of the bonds is to be no more than 3.5%. The actual rate is determined on the date that the bonds are sold to the public. Town Finance Director David Gephart estimates that the effective rate on these bonds will be from 2% to 2.25%. According to him, this will be a bit less than the effective rate on the bonds the town issued to pay down it's public safety debt. Those bonds were taxable bonds with an effective rate of 2.39%.

The town anticipates issuing bonds in the amount of $20,990,000. It anticipates that the face interest rate on the bonds will be such that investors will a premium of $4.4 million to own the bonds. Thus, the bond issuance would raise $25.4 million of which $25 million will go into the project fund. The remaining amount will be used to pay fees.

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The actual borrowing will be more than $25 million

This is because of  fees paid to four third party participants: A special legal counsel, a financial advisor, a trustee, and an underwriter [those who actually sell the bonds].  The total of these costs is estimated to be $357,000.

In this case, the special council is Gust Rosenfeld P.L.C. The financial advisor is Stifel, Nicolaus & Company. The trustee is U.S. National Bank Association, a division of U.S. Bankcorp. The underwriter is Piper Sandler & Co.

These are revenue bonds

The funds to repay these bonds are pledged from the town's sales ["excise"] tax revenues. Thus, they are called excise tax revenue obligations. The town is pledging all not previously pledged sales tax revenues to pay for the bonds. This means that the sales tax revenues must be used first to pay back the bonds. What is left can be used for town operations.

Primary backing is the half cent parks and recreation sales tax

Though the town is pledging all of its sales taxes to pay bond service, the primary fund being pledged is the half cent sales "community center" tax fund. This is now to be called the "Parks and Recreation Excise Tax Fund"

The town believes that fund will have sufficient capital over the 20 year time frame.

"The Town forecasts that the 0.5% sales tax the Town Council identified as the fund source for this bond repayment will be sufficient for both the continuing operations of the Town's golf courses and community center as well as the repayment." (Source)

The interest on these bonds is "tax free"

These bonds are being issued for a civic purpose. Thus the interest on these bonds is tax free. That is, the bondholder will not pay interest on these bonds. This is unlike the $27 million in bonds the town issued in July to reduce the town's large public safety pension underfunding. The interest on these bonds is taxable because the use of the proceeds to pay previous debt is not a "non taxable" use, per IRS rules. The difference between the two types of bonds matters because taxable bonds are generally only purchased by investors who have no tax liability, such as a University's endowment fund.

The proceeds of the bond will be held by a trustee

The proceeds do not become part of the town's general fund. According to the trust agreement the trustee xxx  will disburse the funds for one of three reasons:

• to finance costs related to the project;
• to pay trustee costs and fees and
• to pay pay all or a portion of the costs of delivery of the 2021 Obligations

Generally, the proceeds are reinvested so that earn interest until they are used. In this case, the funds will be used over a three year period.

Bond agreement allows sales tax reduction only if certain conditions are met

Essentially the bond agreement requires that the town maintain sales tax levies at the same level as today. However, the town can reduce sales tax rates as long as the resultant sales taxes are "...equal to at least two times the Annual Debt Service Requirement (as defined in the Trust Agreement) payable under the Agreement. This is approximately $3.4 million. 

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Naranja Park …. Vistoso Preserve… and more…

Council prioritizes projects in the $25 million Parks and Recreation Bond…but not without controversy
The Town Council set priorities for specific parks and recreation projects to be funded by an approximate $25 million bond that will be issued this fall. The projects are listed in the panel that follows. The bond will be repaid by approximately half of the half percent sales tax the town levies to fund the town’s three golf courses and the community center. Town Manager Jacobs and Town Finance Director Gebhart assured the council that the town will have the funds from the sales tax levy to repay these bonds under any foreseeable circumstance. 

The projects that are included in the bond are in addition to projects included in the 2021-22 Parks and Recreation Budget. $1.3 million in this budget is designated spending for Steam Pump Ranch. According to Council Member Bohen this amount is far too little. “Steam Pump Ranch has never been a priority” and there are many unmet needs. 

Council Members Solomon and Greene voted against the priority list. Pointing to the town’s statistically valid survey of resident parks and recreation needs done just last year, Solomon noted that Naranja Park was not even on the list. Solomon stated that the inclusion of massive funding for Naranja Park in this bond simply does not meet the wishes of the residents. 

Solomon is correct that the survey reflects no significant resident interest in building Naranja Park. This has been true since the day the county gave this stone and mortar quarry to Oro Valley. Naranja Park has never been important to the majority of residents. It has only been important to members of council.

Former Vistoso Golf land purchase negotiations continue… Some resolution perhaps in September

Speaking at last week’s council meetings, Rancho Vistoso residents were complementary of Mayor Winfield, Vice Mayor Barrett and Town Attorney Jonathan Rothschild “for their diligent, hard work in bringing this matter to closure.” They were speaking in regards to ongoing negotiations regarding the former Vistoso Golf Course. The matter remains in negotiation. 

 
Speaking after executive session, Town Outside Counsel Rothschild stated that Romspen has “agreed” to a specified price for the property. The Conservation Fund has agreed to purchase the property for the appraised value, which will be known in August.” It is possible that the appraised value will be less than meet amount Romspen wants for the property. Thus, the council likely will have to consider legal options, which may include condemnation, to force a resolution. 

Council Member Solomon said: “We are very close.” Residents hope so. “Its’ been three years”, one resident noted. “Time to bring this to a conclusion.”

Council adjourns until September 7 meeting… Will unveil upgraded council chambers

It will be an “in person” meeting in renovated council chambers. Public participation will be available in person. The town will use Zoom participation for public hearings only. Thus, one who wants to participate in the “call to audience” segment will have to do so in person. Town Manager Jacobs stated that the town will provide more information on how these meetings and those of the town’s boards and commission will take place.