Phoenix is looking to end its general obligation bond drought by moving forward with a plan to ask voters next year to approve $500 million of debt to fund projects in the growing city.
The city council gave the plan the green light in a 6-2 vote on Tuesday.
“This is an exciting opportunity for us to invest in the future of the city of Phoenix from libraries to new parks facilities to fire stations,” said Mayor Kate Gallego, adding that the city has not placed a GO bond issue on the ballot since 2006.
The city’s GO bond committee will now review unfunded capital needs and report its findings and recommendations to the council in December or January, according to Don Wilson, Phoenix’s communications director. If approved by the council, a bond election would be held in November 2023.
Some council members said the bonds were needed to address the city’s growth. Between 2020 and 2021, Phoenix’s population rose by 13,224, the second largest gain among cities, according to the U.S. Census Bureau.
The last time Phoenix issued new GO bonds was in 2012.
The city’s Fiscal Capacity Committee recommended moving forward with a bond election after reviewing property tax revenue models and remaining debt service, concluding that in the absence of unexpected legislative or severe economic changes, the new bonds would not require an increase to the city’s secondary property tax rate and would not adversely affect the city’s bond ratings.
Phoenix levies a primary property tax for operations, while its secondary tax pays principal and interest on GO bonds. The city is rated AA-plus by S&P Global Ratings, Aa1 by Moody’s Investors Service, and AAA by Fitch Ratings.
The committee’s recommendation assumes the bonds would be sold in two 20-year issues of $250 million each, with the first deal, which would have interest-only payments for three years, pricing in fiscal 2024, and the second deal, which would be interest only for one year, pricing in fiscal 2026.
Looking beyond 2023, the committee said Phoenix could return to the ballot for about $500 million of bonds every five years.
“Financial models indicate that routine bond programs of this magnitude will continue to be sustainable without any material increases to property tax rates, assuming no significant legislative changes,” the committee’s report said.
