Scottsdale City Council OKs issuance of $20M in Preserve bonds

Scottsdale City Hall is at 3939 N. Drinkwater Blvd. in downtown Scottsdale. (File photo)

Scottsdale City Council has approved the issuance of $20 million in Preserve general obligation bonds to prepay and refinance the Scottsdale Preserve Authority.

Council rendered this decision at its Tuesday, March 21 meeting at City Hall, 3939 N. Drinkwater Blvd., as part of the consent agenda. Similar to previously-issued Preserve bonds, debt service on these new general obligation bonds will be paid from Preserve excise taxes, according to a city staff report.

Part of why the city wants to refund the existing Scottsdale Preserve Authority revenue bonds through general obligation preserve bonds is because of the anticipated drop in interest costs. This could potentially result in more savings and a positive impact on the Preserve fund, a staff report states.

This potential decrease in interest costs is because of a stronger general obligation bond credit rating, according to the report.

The city looked into credit ratings from three different credit rating firms and received the highest rating from all three. Those credit firms the city referenced were Standard and Poor’s, Fitch and Moody’s Investor Services. Comparatively, The SPA revenue bonds rated in the “Very Low Credit Risk” category but were not as low as general obligation bonds, according to a staff report.

According to the Arizona Constitution, general obligation bonded indebtedness cannot exceed 6 percent of the net assessed full cash valuation of the taxable property in the city.

Cities can also issue general obligation bonds up to an additional 20 percent of the net assessed full cash valuation for providing certain amenities including acquisition and development of land for open space preserves.

After the approved bond issuance, the city will have about $347.5 million in remaining debt capacity under the 6 percent stipulation and about $732.7 million under the 20 percent stipulation.

The next step for the city is to meet with three credit rating firms this spring to confirm ratings of the bonds. Staff will then proceed with the bond sale in April or May, depending on specific terms outlined by the city.

The bonds then will be sold on a negotiated basis and City Treasurer Jeff Nichols will execute a Bond Purchase Agreement with selected underwriters on behalf of the city.

Qualified electors of the city authorized the issuance of $500 million principal amount of general obligation bonds to help finance Preserve land acquisitions and improvements. At this point, $221,525,000 of that amount has been issued.

After the issuance and sale of $19,230,000 of Preserve general obligation bonds, the city will have a little less than $260 million principal amount remaining in authorized but unissued general obligation bonds.

City staff state conservative cash flow projections show insufficient Preserve excise tax collections to fund the remaining unissued amount of authorized debt. City Staff will only consider more debt issuance when cash flow projections indicate sufficient Preserve excise taxes to support any future Preserve bond issues.

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