Arizona town drops planned $70 million bond sale

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An Arizona town terminated a plan to sell $70 million of bonds despite prevailing in a lawsuit that claimed the debt's approval violated the state constitution. 

The Payson Town Council voted Oct. 23 to rescind its Aug. 21 approval of the tax-exempt, fixed-rate pledged revenue obligations in the wake of ongoing litigation, including an appeal of the Oct. 2 Gila County Superior Court ruling, as well as opposition to the bond sale from incoming council members.

Those factors made the bonds too risky to sell, Town Manager Troy Smith told the council.

The conservative Goldwater Institute, which filed the lawsuit in September and a subsequent notice of appeal of the court ruling on behalf of a Payson resident, hailed the town's decision not to sell the bonds. 

"The court battle against governments' abuse of emergency clauses isn't over — indeed, local governments throughout the state routinely bypass democratic accountability using 'emergency' clauses," the institute said in a statement on Wednesday. "We're fighting back to ensure government can't steamroll its own citizens and deny them rights afforded under Arizona's constitution."

The complaint contended Payton officials denied residents an opportunity to organize a referendum on the debt issue by fast-tracking its issuance "under the pretext of an emergency" in violation of the Arizona Constitution.

It argued the council aimed to bypass the constitution's right of referendum by using a narrow exemption allowing municipalities to enact emergency measures when such actions are "necessary for the immediate preservation of the peace, health or safety of the city or town."

The court found the lawsuit was moot and the council's 6-1 vote approving the bonds met a supermajority requirement in state law for invoking the emergency clause, according to a town council document. 

The town had several explanations for authorizing the emergency clause, including the 2019 closure of a pool that limited the ability to teach children how to swim and avoid drowning and for others to participate in health-promoting aquatic activities. In addition to an aquatic and recreation center, the bonds would have funded various capital improvements for Payson's 16,680 residents. 

The decision to drop the bond issue was also driven by opposition to its sale by the mayor-elect and two council members who take office in December, according to a statement from the town.

The bonds, which were rated AA-minus with a stable outlook by S&P Global Ratings, were backed by a first-lien pledge on Payson's excise tax and state-shared revenue and structured with serial maturities between 2025 and 2049, according to a draft preliminary official statement submitted at the Aug. 21 council meeting.

Payson had planned to sell the bonds through Stifel, Nicolaus & Co. in September.