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ACMA Conference February 8, 2007

Evaluating Investments in Infrastructure Panel Overview of Public Infrastructure Financing in the City of Phoenix. ACMA Conference February 8, 2007. Public Infrastructure Needs for the City of Phoenix. Streets, Transit and Light Rail Fire and Police (Public Safety) Parks and Open Spaces

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ACMA Conference February 8, 2007

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  1. Evaluating Investments in Infrastructure PanelOverview of Public Infrastructure Financing in the City of Phoenix ACMA ConferenceFebruary 8, 2007

  2. Public Infrastructure Needs for the City of Phoenix • Streets, Transit and Light Rail • Fire and Police (Public Safety) • Parks and Open Spaces • Water, Sewer, Flood, Solid Waste • Neighborhoods and Housing • Libraries • Education and Cultural Facilities • Airport Improvements

  3. CITY OF PHOENIX CAPITAL ASSETS BY TYPE FY 2005-06 Infrastructure and Improvements Total Assets $8.9 Billion

  4. Revenue Sources to Pay for Infrastructure • Secondary Property Taxes • Local Sales (Excise) Taxes • State Shared Revenues • Water, Sewer, Solid Waste Fees • Airport Fees and Charges • Impact or Development Fees • Grants • Other User Charges

  5. How will Infrastructure be Funded? • Pay-As-You-Go (Cash)? • Debt Finance (Short or Long Term Borrowing)?

  6. Factors to Consider When Debt Financing • Can the project be funded with current year revenues or be deferred until revenues are available? • Availability of a long-term stable revenue source to make debt payments. • Available debt capacity. Is credit already leveraged? • The useful life of the projects being financed (defines term of the debt). • The credit quality of the municipality and revenues pledged (i.e., property taxes vs utility revenues). • The borrowing cost or interest rates for the credit.

  7. City of Phoenix Debt Program

  8. Types of Bonds Issued • General Obligation • Highway User Revenue • Utility Revenue • Municipal Corporation Obligations • Revenue Pledge • Excise Tax Pledge

  9. DEBT FINANCINGS BY TYPE FY 2005-06 G.O. Bonds Revenue Bonds/Other Municipal Corporation Obligations Total $6.1 Billion

  10. Civic Improvement Corporation • Non profit corporation established in 1973 • Main Financing Arm of City for Other than G.O. Bonds • Debt Obligations Issued by Corporation Secured by Enterprise Fund Revenues or Excise Tax Pledges

  11. Municipal CorporationOutstanding ObligationsJune 30, 2006

  12. General Obligation Bond Program • Primary mechanism used historically to fund non-enterprise fund capital needs • Debt secured by secondary property taxes of the City • Require voter approval

  13. History of Voter Approved G.O. Bond ProgramsCity of Phoenix $ Millions $1057.4 $878.5 $753.9 $525.7 $436

  14. Public Review Process forGeneral Obligation Bond Programs • Departments develop requested capital projects • Citizen Bond Committee and subcommittees appointed (600 citizens) • Fiscal Capacity Subcommittee reviews Assessed Valuation forecast and debt capacity analysis • Operations and Maintenance Subcommittee review of operating costs

  15. Public Review Process forGeneral Obligation Bond Programs • Subcommittees hold public hearings (over 80 public meetings) • Subcommittees recommend projects to Executive Committee • Executive Committee develops recommendation within fiscal capacity • Council approves Bond Program • Citywide vote on Bond Program

  16. Financing Downtown Public/Private Partnership Project (CITYSCAPE)

  17. Cityscape Project • Project to develop 3 blocks in core of Downtown between Jefferson and Washington Streets, 1st Street and 2nd Ave. • Led by Red Development in partnership with Baron Collier • Planned 2.5 million sq. ft. of four mixed-use residential and commercial towers, including 150 room hotel and 220,000 sq. ft of retail space • Total project cost approximately $900 million

  18. Challenges of City Participation • City Excise Tax capacity leveraged for Convention Center Expansion and for backing of new Downtown Hotel • No reserves or pay-as-you-go funding available due to other City commitments • Speculative nature of the project and large financing required by the Developer (more than $800 million) • Uncertainty of revenue and sales tax generation from the project

  19. City Participation TERMS OF DEVELOPMENT AGREEMENT • No City purchase of parking until construction in form of Certification of Completion (C of O) of parking garage, 220,000 sq. ft of retail, 500,000 sq. ft of commercial and 150 room hotel are completed. • Developer guarantees projected parking and sales tax revenues from project for first five years through a letter of credit from a bank approved by the City that can be drawn upon for any shortfalls to finance $70 million in excise tax bonds. • City sells Jefferson Street Garage near U.S. Airways Center to provide for $20 million to purchase additional underground parking from the Project.

  20. Questions?

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