City of Phoenix bond program on track with low interest rate
[Source: Scott Wong, Arizona Republic] — Moody’s Investors Service recently lowered Phoenix’s ratings outlook from “stable” to “negative,” but city officials said it didn’t hurt the city’s ability to sell hundreds of millions of dollars of bonds to pay for parks, fire stations, library expansions, and other projects. The city this month sold $350 million in general-obligation bonds, authorized in 2006, and refinanced an additional $117 million in bond debt, both at 3.37 percent, a rate that is near historic lows for government borrowing. Phoenix previously had been repaying that debt at a rate of about 4.5 percent.
Officials said the refinancing saves Phoenix taxpayers about $11.5 million over 25 years. The bonds are paid back through secondary property taxes. “The low interest rates help keep our 2006 bond program on track,” said Interim Finance Director Jeff DeWitt. “It’s really cheap to borrow for governments right now, and that made this deal very attractive to the city.”
Both Standard & Poor’s Financial Services and Moody’s recently gave Phoenix the highest bond rating given the municipalities, AAA for S&P and Aa1 for Moody’s. But Moody’s revised the city’s outlook to negative because of the city’s falling sales-tax revenue and ongoing budget woes. The credit-ratings agency also said the regional economy’s reliance on the housing sector posed financial challenges for Phoenix. “If the economy turns around, our outlook could improve to stable,” DeWitt said.
In March 2006, Phoenix voters approved an $878 million bond program to revitalize neighborhoods, preserve historic buildings, improve streets and other infrastructure, and boost arts and cultural programs. About $270 million in 2006 bonds remain to be sold. [Note: Read the full article at City of Phoenix bond program on track with low interest rate.]