Mesa, Ariz., Bond Ballot Question Slashed to $169M From $409M

DALLAS - Voters in Mesa, Ariz., will decide in November on a $169.2 million general obligation bond package that is less than half the size of the original $408.8 million proposal.

If the two bond questions allocating $110.9 million in proceeds to road projects and $58.3 million for public safety needs are approved, the Phoenix suburb would probably in 2009 impose its first property tax since the levy was removed in 1945. Mesa currently supports its GOs with profits from the city-owned utility system and sales tax revenues rather than by an ad valorem tax.

Both ballot questions state that debt service on the bonds will be supported with revenues from a property tax "unless the governing body provides for payment from other sources."

Deputy city manager Bryan Raines said a property tax would be required if the bonds are approved.

"Right now there is no other source that we want to tap," he said. "We're telling everyone that a vote for the bonds means a vote for the property tax. The City Council wanted that provision just in case some other source could be found, but that is not likely."

Shifting the debt service payments to property tax revenues would reduce the city's dependence on utility system and sales tax revenues to service its debt, Raines said.

"Utility revenues are holding their own, but sales tax collections were down 3.5% in fiscal 2008," he said. "We're still seeing some softness in sales tax, with a double-digit decline for the first month of fiscal 2009. That's in line with what we're seeing from other cities in the Phoenix area."

If both bond questions pass, the annual payments on a home with a taxable valuation of $250,000 would average nearly $47.50 a year. The owner of a commercial or industrial property assessed at $2.5 million would pay annual property taxes of $859.

In May 2006 a measure to reimpose the property tax was overwhelmingly rejected but voters did approve an increase in the city sales tax from 1.25% to 1.75%.

Mesa's GOs are rated AA by Standard & Poor's and A1 by Moody's Investors Service.

The city had proposed a four-year, $408.8 million bond program that allocated $230.6 million for road and street work and $178.2 million for fire and police projects. However, council elections in May resulted in five new members on the seven-member board. The new majority wanted a shorter, less-expensive bond package.

"Since these bonds were linked to a property tax, the council wanted to make sure the biggest needs were taken care of on a priority basis," he said. "Instead of a four-year program, we cut it down to a two-year program. Basically we're taking care of the first two years of the longer program with these bonds."

If the larger proposal had been accepted, Raines said, the city would not have had another bond election until 2012. If the scaled-back program is approved by voters in November, he said, another bond election could be held as early as 2010.

If the bonds are approved, the city would sell a $47 million tranche, with $33.8 million for streets and $13.2 million for public safety, in 2009. Mesa would complete the authorization in 2010 with a $122.2 million sale to provide $77.1 million for street projects and $45.1 million for public safety.

The $58.3 million of public safety projects includes $15 million for a new police station, $9 million for a new airport fire station, $8.6 million for an upgraded communications system, and $9.4 million for two new fire stations.

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