DALLAS — Amid rising sales tax revenue and an improving economy, Phoenix is considering a bond issue to revive plans for a $288 million extension of the metro area’s new light-rail system.
The 3.2-mile northwest extension was abruptly shelved in July 2009 as preparations were underway to break ground.
City officials have said that Mayor Phil Gordon would like to get plans firmed up in preparation for a bond issue before he leaves office in December.
Unlike some regional transportation districts that combine the taxing authority of various local governments, the Phoenix area’s Metro light rail is supported by bond issues from individual member cities. The current light-rail project runs eastward from Phoenix to the suburbs of Tempe and Mesa.
Along with the northwest line, Phoenix last year placed about $250 million of traditional bond-funded projects on hold in an effort to preserve its AAA rating from Standard & Poor’s and avoid a downgrade on its Aa1 from Moody’s Investors Service. At the time, Moody’s had a negative outlook on Phoenix. In May, Moody’s analysts affirmed the Aa1 and revised the outlook to stable.
“The stable rating outlook primarily reflects Moody’s expectation that the city’s financial performance will remain in line with its rated peers despite some remaining budgetary stress related to the recent recession,” wrote analyst Matthew Jones. “The stable outlook also reflects our expectation that economic recovery in the region will be somewhat slow given continued weakness in housing and employment.”
Though the collapse of the housing market has left a deep impact on the metro area’s economy, city officials see promise of recovery in the form of so-called transit-oriented development along the light-rail route.
One new downtown Phoenix development called CityScape combines high-rise residential units with trendy restaurants and retail outlets next to a light-rail transit station with easy access to the downtown campus of Arizona State University and other attractions.
With this year’s rebound in revenue and low interest rates available in the bond market, the city should be able to issue debt without harming its ratings, officials believe.
Advancing the project will require approval from the Metro transit board and the Maricopa Association of Governments to tap $55 million from a Maricopa County-wide sales tax of 0.5 cents per dollar. The $55 million was removed from the northwest extension budget and assigned to other future projects when officials decided to halt the project.
Meanwhile, Phoenix’s Sky Harbor Airport celebrated a milestone Tuesday with the arrival of its first car for the train that will link up with the light-rail system. The $1.5 billion project, funded with airport bonds, will begin with a two-mile segment from a transit station at the airport’s entrance.
The so-called Sky Train will ride on rubber tires along a single guideway, unlike the light rail, which uses parallel steel tracks. The system comes from the Canadian firm Bombardier, which also manufactures jet aircraft, such as the regional jets commonly seen at most airports.
Phoenix issued $710 million of junior-lien revenue bonds in July 2010 to finance the automated transit system. The negotiated deal was the largest in the city’s history.
The bonds, issued by the Phoenix Civic Improvement Corp., carry ratings of A-plus from Standard & Poor’s with a stable outlook. The senior-lien airport bonds are rated AA-minus. Moody’s rated the senior-lien bonds Aa2 and the junior-lien debt Aa3.
Construction of Phase 1 of the Sky Train has already begun and is expected to be completed in the first quarter of 2013. Construction of Phase 2, scheduled to begin in 2016, will link the remaining terminals and the rental car center. The five-mile system is expected to be completed by 2020.
