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Title:
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Issuance of Utility System Revenue Obligations (Utility Revenue Bonds) Series 2025
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STRATEGIC OUTCOMES
ACTION
DEPARTMENT:
? Safe & Prosperous
? Motion
Finance
? Active & Appealing
? Resolution
? Respected & Responsible
? Ordinance - Introduction
DIVISION:
? Connected & Engaged
? Ordinance - Adoption
? Unique & Creative
? Public Hearing
TITLE:
title
Issuance of Utility System Revenue Obligations (Utility Revenue Bonds) Series 2025
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SUMMARY RECOMMENDATION:
Summary Recommendation
Adopt an ordinance authorizing the issuance, sale, and delivery of Utility System Revenue Obligations (Utility Revenue Bonds) Series 2025 to fund $44,000,000 water and wastewater improvements in the FY 2026-2030 Capital Improvement Plan, refund prior obligations (bonds) if advantageous, and cover issuance costs, with final terms delegated to the City Administrator and Finance Director within Council-approved limits. (City Administration/Finance) (Jay Simonton/Doug Allen)
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STRATEGIC OUTCOME:
The issuance of Utility System Revenue Obligations (Utility Revenue Bonds) supports the City Council's strategic outcome of Safe and Prosperous by providing the funding needed to complete critical water and wastewater improvements that serve residents and businesses, ensure reliable utility services, and support future growth. This financing approach demonstrates responsible stewardship of City resources by leveraging favorable market conditions, providing predictable repayment costs, and preserving long-term financial flexibility.
REPORT:
The municipal bond market is currently favorable for new borrowing and refinancing. Bonds are one of the primary tools cities use to finance major capital projects too large to be funded within a single year's revenue stream.
By issuing bonds, the City is able to complete significant improvements now-such as upgrades to the water and wastewater systems-while spreading repayment into predictable annual costs over time. This approach allows the City to maintain reliable utility services, support community growth, and preserve cash reserves for emergencies and ensuring compliance with Arizona's Annual Expenditure Limitation (AEL).
The proposed ordinance authorizes the City to issue Utility System Revenue Obligations (Utility Revenue Bonds) to take advantage of favorable market conditions. Repayment will be secured by a pledge of net revenues from the City's water and wastewater systems, after payment of operations and maintenance costs. These obligations are not backed by property taxes and will never constitute a general obligation of the City.
The City will use proceeds of $44,000,000 to fund:
* Water and wastewater utility improvements identified in the FY 2026-2030 Capital Improvement Plan
* Refund prior utility revenue obligations (utility revenue bonds) if market conditions provide cost savings
* Pay the costs of issuance
The obligations will be underwritten by Stifel, Nicolaus & Company, Incorporated, which also underwrote the City's 2021 Public Safety Personnel Retirement System refinancing and the 2021 Desert Dunes Utility System Revenue Obligations. A trustee will be appointed through an indenture agreement to oversee the issuance. The obligations will be issued in book-entry form, with interest qualifying for tax-exempt treatment under federal law.
Because interest rates are volatile, the ordinance delegates authority to the City Administrator and Finance Director to finalize repayment schedules, maturities, callable features, credit enhancements, and aggregate principal within the limits set by Council. Final sale results, including interest rates and repayment schedules, will be reported back to City Council. Adoption of this ordinance is scheduled for October 1, 2025, with the bond sale expected in late November or early December 2025.
FISCAL REQUIREMENTS:
CITY FUNDS:
$ 0.00
BUDGETED:
$ 0.00
STATE FUNDS:
$ 0.00
AVAILABLE TO TRANSFER:
$ 0.00
FEDERAL FUNDS:
$ 0.00
IN CONTINGENCY:
$ 0.00
OTHER SOURCES:
$ 0.00
FUNDING: ACCOUNT/FUND #/CIP
n/a
TOTAL
$ 0.00
FISCAL IMPACT STATEMENT:
Issuing utility system revenue obligations will accelerate completion of needed water and wastewater improvements, provide predictable annual repayment costs, and preserve fund balances for unforeseen situations. This financing approach also helps the City manage Arizona's Annual Expenditure Limitation, as both bond proceeds and repayments are excluded from the state-imposed spending cap.
Unspent bond proceeds will remain available in future fiscal years until the associated projects are completed.
ADDITIONAL INFORMATION:
SUPPORTING DOCUMENTS NOT ATTACHED TO THE CITY COUNCIL ACTION FORM THAT ARE ON FILE IN THE OFFICE OF THE CITY CLERK:
1. Ordinance
2. Preliminary Official Statement
3. Obligation Indenture
4. Obligation Purchase Agreement
5. Series 2025 Purchase Agreement
IF CITY COUNCIL ACTION INCLUDES A CONTRACT, LEASE OR AGREEMENT, WHO WILL BE RESPONSIBLE FOR ROUTING THE DOCUMENT FOR SIGNATURE AFTER CITY COUNCIL APPROVAL?
? Department
? City Clerk's Office
? Document to be recorded
? Document to be codified
ACTING CITY ADMINISTRATOR:
DATE:
John D. Simonton
09/09/2025
REVIEWED BY CITY ATTORNEY:
DATE:
Richard W. Files
09/08/2025