By Robert Cohen
My Letter sent to Queen Creek Town Council in advance of their December 5th, 2018 Public Meeting
This is in reference to Encanterra Annexation (Case No. P18-0103). I am a resident of Encanterra and I do not support annexation by Queen Creek. One of the biggest reservations I have about being annexed into Queen Creek is my concern that the Town of Queen Creek leadership has not been fiscally prudent in managing Queen Creek’s growth. I am concerned that Queen Creek’s town leadership may be blinded by their ambition to grow the size of the town faster than the town’s ability to prudently pay for its growth. I think that explains why Queen Creek has amassed such a large amount of debt including the town’s unfunded pension liability. As a result, Queen Creek’s sales tax rates and property tax rates are already higher than other major east valley cities of Gilbert, Chandler, Mesa, Tempe, and Scottsdale.
In 2008, the East Valley Tribune noted Queen Creek had the highest debt per capita in Arizona. In the last ten years, the town’s leadership has done little to reduce its reliance on borrowed funds which should be a concern to its residents. I have concerns that Queen Creek is overly debt leveraged for a town of its size and will have difficulty withstanding a significant economic downturn without a host of adverse consequences to its residents. Residents living in a city with a higher debt per capita are at greater risk of seeing their tax rates increase in an economic downturn.
While Queen Creek has had an AA credit rating since 2016, this credit rating is based only on a point in time in what is today a very good economy. In an economic downturn, things can change quickly for the worse, including a town’s credit rating. If Queen Creek’s credit rating declines, the town will experience even higher borrowing costs as a result. Interest rates for the last ten years have been at historic lows, which has allowed a forgiving environment for municipalities with higher debt levels like Queen Creek, However, interest rates have begun to trend upward with the result of increasing borrowing costs as existing debt matures and is reissued.
I am also concerned that in the event of a severe economic downturn, Queen Creek may be forced to reduce the quality of its city services, such as fire and police protection, and increase its tax rates even higher than they are today, to maintain the debt service coverage cushion required by the town’s borrowing agreement with its bondholders.
There is no doubt that annexation of Encanterra would be very beneficial to Queen Creek. Queen Creek would earn a minimum of $2.7 million in taxes each year from Encanterra with little-associated expenses, as Encanterra residents’ HOA will still be responsible to pay for its roads and other maintenance costs inside our gated community. However, I see no benefit annexation brings to Encanterra residents. Annexation would result in Encanterra residents having to pay the town’s city sales tax on purchases in our club, our recreation dues, utility bills, online purchases, and home improvements. We would no longer receive our excellent police protection from PCSO, which is much more familiar with our community than a police department located in another county. Fire and emergency medical protection would be pushed farther away from where it is located now.
I am also concerned Queen Creek ‘s reputation will be branded as a town with high tax rates and that this will hurt Encanterra property value. It is hard to see how living in Queen Creek will be a positive influence on Encanterra property values as Encanterra property values are already higher than property values for Queen Creek on average.
I feel our community has been unfairly hijacked by a small number of Encanterra residents who have led this annexation initiative, encouraged by Encanterra’s developer who is motivated by the hope of financial incentives to be gained from Queen Creek as a result of annexation. This small group of residents has misled or frightened many of our other residents with a lot of misinformation and scare tactics about the need to act on annexation today or suffer some terrible fate as a result of maintaining the status quo. This annexation matter has pitted resident against resident and disrupted the peace and tranquility we previously enjoyed in our community. I am hopeful to see this matter quickly put to bed as it is hurting our community.
Robert B Cohen