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Debt handbook tallies City of Prescott's outstanding obligations
5/10/2012 9:56:00 PM
By Cindy Barks
PRESCOTT - With about $74.6 million in outstanding debt, the
City of Prescott
is far from its legal debt capacity of upwards of $275 million.
The city's financial consultant Shawn Dralle told the
Prescott City Council
this week that the relatively cautious practices have helped Prescott to retain a favorable rating among bonding agencies.
"The city has been very conservative in its approach to debt," Dralle said. That, in turn, has resulted in AA, AA-, and Aa2 marks from three nationally recognized bond-rating agencies.
The state of the city's debt was the topic of discussion during the Prescott City Council's Tuesday meeting. Dralle, the managing director of RBC Capital Markets, was on hand to break down Prescott's outstanding financial obligations.
In a 56-page "Debt Handbook," Dralle listed the five types of debt the city currently carries: general obligation bonds; Municipal Property Corporation bonds; improvement districts; Community Facility District bonds; and Water Infrastructure Finance Authority bonds.
At $43.1 million, the city's Municipal Property Corporation (MPC) bonds represent its highest debt obligation.
The MPC bonds, which the city pays back through revenue sources such as sales tax and water fees, went to finance a number of major recent projects.
Among the MPC debt:
$10.9 million of the original $16.9 million loan in 2004 for the purchase of the Big Chino Water Ranch property.
$5.7 million of a $6.6 million bond in 2007 to expand the Sundog Ranch Road Transfer Station and build the new fleet maintenance building.
$17.5 million of an $18.3 million loan in 2010 for the construction of the Highway 89A/Granite Dells Parkway interchange.
$8.9 million of the $8.9 million bond in 2011 for the Williamson Valley Road improvement project.
Water Infrastructure Finance Authority (WIFA) loans make up the second-highest debt category for the city. At a total of about $23 million, the WIFA loans have gone for a variety of water and sewer system improvements.
Budget and Finance Director Mark Woodfill noted that the city also has the authorization for an additional $45.8 million in WIFA loans for the upcoming improvements to the Airport Wastewater Treatment Plant.
Other outstanding debt includes:
$3.6 million remaining in the original $17.4 million in general obligation loans for the 1998/99 voter-approved purchase of Willow and Watson lakes.
$1 million remaining in about $4.5 million in early-2000s loans for construction of new streets around the Prescott Gateway Mall.
$3.8 million remaining in the $8.6 million Community Facilities District (CFD) bonds that the city approved in 1996 and 2000 for the Hassayampa Community Facilities District. While the city administers the CFD bonds, Woodfill said it is not responsible for the payback of the loans. The Hassayampa Community Facilities District is current on its assessments, he added.
Along with the list of outstanding debts, the debt handbook also included information about the city's debt capacity.
Based on Prescott's net secondary assessed valuation, its general-obligation debt limit totals about $164 million, according to the handbook. (Woodfill stressed, however, that any general-obligation debt, which is paid back through property taxes, would require approval by the voters).
In addition, the city's revenues would allow for an MPC debt capacity of about $69 million. Along with the already authorized $46 million in WIFA bonds, the city's debt capacity totals about $279 million.
The city's Moody's, S&P, and Fitch bond ratings of Aa2, AA-, and AA, respectively, compare favorably to many other communities in Arizona, Dralle said.
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