Jerry Hart, financial services manager for the Phoenix suburb of Tempe, has recommended delaying $109.5 million of bond-financed capital improvement projects because new, lower property-value assessments will not support the debt service on millions of dollars of authorized but unissued bonds.
Projects affected by the freeze include street and bridge repairs, upgrades to neighborhood parks, and a new fire station.
Hart told city councilors last week that he expects a 35% decline in secondary assessed property values over the next three fiscal years, based on preliminary figures from the Maricopa County Assessors Office.
The city levies a combined property tax rate of $1.40 per $100 of assessed valuation. Of the total tax rate, 91 cents is a secondary property tax that supports Tempe’s general obligation bonds.
The median value of a single-family home in Maricopa County was $203,300 in fiscal 2010, the assessor’s office said, but the value is expected to drop to $172,800 in fiscal 2011 and $149,500 in fiscal 2012. Hart said if valuations in Tempe drop 35%, annual revenue from the secondary property tax would decline by $11.7 million through fiscal 2011.
The city’s five-year capital improvement program calls for $120 million of new GO bonds over the next five years. Hart said if property tax revenue falls as expected, the city would have the capacity to issue only $6 million of GO bonds each year.
“A loss of that annual bonding capacity would essentially eliminate our ability to implement much of the tax-supported capital program within the planning horizon,” Hart told councilors in a memo.
He said the $6 million of available annual capacity would be needed to ensure that Tempe continues to meet contractual obligations on on-going projects.
Tempe’s GO bonds are ratedAAA by Standard & Poor’s and Fitch Ratings, and Aa1 by Moody’s Investors Service. Tempe has $164 million of outstanding GO debt and $134.3 million of authorized but unissued GO bonds.