Originally Published: December 18, 2009 10:44 p.m.
PRESCOTT - The wheels are now in motion for the city's plans to borrow as much as $19 million to cover the cost of the interchange project that is under way on Highway 89A near Side Road.
In unanimous action Thursday, the city's Municipal Property Corporation approved a measure for the issuance of revenue bonds for "not to exceed $19 million aggregate principal."
The city proposes paying off the bond debt through its sales tax for streets.
While the Prescott City Council will make the final decision on the matter in January, the four-member Municipal Property Corp. was responsible for taking the first step toward the bond issue, which would involve Municipal Property Corp. bonds.
Engineering Services Director Mark Nietupski explained to the corporation this week that the bonding amount totals $19 million, because it includes costs for design and administration, along with the $17.1 million in construction costs.
While the city will pay the bulk of the cost for the interchange, Nietupski noted that Yavapai County would contribute $1.5 million, and the Arizona Department of Transportation has pledged $1 million.
Another contribution - $480,000 from the nearby Centerpointe East development - currently is in question, however, because the interchange construction was not under way by the June 2009 deadline.
While the city originally had planned to have the project under construction by spring 2009, a lawsuit over who would get the contract for the project delayed the project.
After months of litigation, the city settled the matter in October, with the low bidder Asphalt Paving & Supply winning the contract. Construction got under way in November.
City officials say the "up to $19 million" wording in the measure would allow the city to determine the necessary bonding amount later.
Along with its approval of the bonding measure, the Municipal Property Corporation also weighed in on the type of bonds the city should pursue.
Shawn Dralle, the city's financial consultant, explained that the recent American Recovery and Reinvestment Act (federal stimulus program) included a subsidy for Build America Bonds, which could result in an interest-rate savings for the city.
Even so, Budget and Finance Director Mark Woodfill noted that the bonds would come with some risk over their 20-year term, because of uncertainty over whether the federal government would continue to pay the subsidy in the future.
In response to Woodfill's suggestion that the Municipal Property Corp. should set guidelines for whether he should proceed with the Build America Bonds, the board members agreed that the savings over the life of the bonds should be no less than $400,000.
Woodfill and Dralle explained that while they have had initial discussions with bond-rating agencies, they would not know the interest-rate specifics until they are further into the bond sale - probably in late January.
City officials have long eyed bonds as a way to pay for the interchange. And with the Sept. 1 voters' approval of a 20-year extension of the street sales tax, the city also will consider issuing debt for other future street projects as well.
Woodfill said the bonding for future street projects likely would be part of the upcoming 2010/2011 fiscal-year budget discussions, which will begin in early 2010.
Under consideration will be bonding for a number of city projects for which the design is already complete.
The list includes reconstruction of portions of Park Avenue, Mount Vernon/Senator Highway, Robinson Drive, and Rosser, as well as the widening of Williamson Valley Road from Sidewinder to Shadow Valley Ranch Road.