Consideration and Adoption of Ordinance No. 2016-28:  An ordinance of the Council of the City of Flagstaff, Coconino County, Arizona, approving and authorizing the sale and issuance of City of Flagstaff, Arizona general obligation bonds, series 2016, in the total aggregate principal amount of not to exceed $18,200,000 and all matters related thereto; prescribing certain terms and conditions of such bonds including the delegation to the Management Services Director of the City to designate the final principal amount, maturities, interest rates and yields and other matters with respect to such bonds; awarding a contract for the purchase of such bonds; ratifying preparation of a preliminary official statement and approving the use and distribution thereof and approving the preparation of a final official statement and the execution, use and distribution thereof (General Obligation Debt Authorization - Open Space, Core Facility, and Watershed Protection)

This ordinance allows for the issuance of General Obligation debt as approved by voters in 2004 and 2012.  Debt will be issued for the Core Maintenance Facility, Open Space, and Forest Health and Watershed Protection.  An ordinance for this action is required by City Charter ARTICLE VI - FINANCE AND TAXATION, Section 5 - WHEN ACTIONS ARE TO BE TAKEN BY ORDINANCE.

Series 2016 General Obligation Bonds will be issued as New Money Bonds in an amount not to exceed $18.2 million to include all or a portion of the following:

• 2004 authorization - $7,600,000 for Open Space and FUTS acquisition.  Anticipate issuing remaining $2,2000,000 of the authorization.
• 2012 authorization - $14,000,000 for a Core Services Maintenance Facility. Anticipate issuing the full amount of the authorization.
• 2012 authorization - $10,000,000 for Forest Health and Watershed Protection Project.  Anticipate issuing $2,000,000 of the remaining $8,000,000 authorization.

These bonds will be issued as General Obligation Bonds and will be repaid through secondary property tax collections within the current rate  of $0.8366 per $100 of assessed valuation.

COUNCIL GOALS:
2) Ensure Flagstaff has a long-term water supply for current and future needs
3) Provide sustainable and equitable public facilities, services, and infrastructure systems in an efficient and effective manner to serve all population areas and demographics
11) Ensure that we are as prepared as possible for extreme weather events
REGIONAL PLAN:
Goal OS.1.  The region has a system of open lands, such as undeveloped natural areas, wildlife corridors and habitat areas, trails, access to public lands, and greenways to support the natural environment that sustains our quality of life, cultural heritage, and ecosystem health.
Goal WR.6.  Protect, preserve, and improve the quality of surface water, groundwater, and reclaimed water in the region.
Goal LU.7. Provide for public services and infrastructure.
Goal REC.1.  Maintain and grow the region’s healthy system of convenient and accessible parks, recreation facilities, and trails.

Yes.  Council authorized the 2004 and 2012 elections which voters approved the issuance of debt for the specific projects.  Issuing debt was anticipated when the voters approved the questions on the ballots.

• Approve the Ordinance as written allowing the City to move forward with the issuance of New Money Bonds as General Obligation debt. Pros-Allows for cash flow necessary to complete voter approved projects while maintaining current secondary property tax rate.  Cons-Increases City debt.
• Recommend changes to the Ordinance modifying the issuance of either the New Money Bonds. Pros and Cons are dependent on changes.
• Do not approve the issuance of General Obligation Debt. Pros-Delays level of debt for the City.  Cons-Projects may need to stop and the City will need to find the cash flow for work completed to date.

On May 18, 2004 the City of Flagstaff voters approved 10 projects.  The remaining authorization for General Obligation Bonds include $2,800,000 for the Lake Mary Regional Park and Other Parks Land Acquisitions and the final $2,200,000 of the $7,600,000 authorized for  Open Space and FUTS projects. This ordinance contemplates the issuance of $2,200,000 in the remaining Open Space/FUTS authority to be used for the continued expansion of our City's FUTS trail system. The full $2,200,000 in FUTS/Open Space bonds may not be issued dependent on the work program for the FUTS trail construction over the next two years. As authorized in this ordinance, Rick Tadder, Management Services Director will finalize this decision before the final bond sale.  

On November 6, 2012, the City voters approved $24,000,000 in General Obligation bonds to be issued.  $14,000,000 for a Core Services Facility and $10,000,000 for the Forest Health project.  The City has issued the initial $2,000,000 to advance the forest health project and this next $2,000,000 issuance is believed to be adequate for the next two years.  This ordinance contemplates the issuance of $14,000,000 for the Core Services Facility.  The entire amount is proposed at this time as the City has approved a Design/Build agreement and it is anticipated completion the project within the next 12-18 months. Again, as authorized in this ordinance, Rick Tadder, Management Services Director will finalize the amount to be issued before the final bond sale.

The proposed ordinance includes the maximums contemplated to be issued to provide the greatest flexibility in both amount and timing.  This authorization allows us to go into the market with the most favorable factors in play including market saturation, rates, and ratings.

While the purpose of this agenda item is to approve an ordinance to allow the City to issue debt, we have included a draft Preliminary Official Statement and Purchase Agreement  as informational documents you may review.  These documents have been reviewed by our Financial Advisors and Bond Counsel.  These are materially complete however may have some changes prior to completion of the debt transactions.  Final documents will be available upon request to the Management Services Director.

The New Money Bonds will be paid through the assessment of secondary property taxes. To meet the promise made to the public to hold the secondary property rate flat, the City will use strategies including using the secondary property tax reserves and issuing debt that is layered in so that the City can maintain the existing secondary property tax rate of $0.8366 per $100 of assessed valuation.

Once the fund balance reserve in our Secondary Property Tax Fund has been drawn down, the City will not be able to replenish it.  Legislation has been passed that caps the annual assessed valuation increase and it sets a maximum levy amount annually to match the current debt payments and the payments anticipated through new issues.
 

The community benefits by having the City complete the projects as promised to the voters in the 2004 and 2012 elections.

The process to authorize the issuance of debt is to INFORM the public.
The process to select the projects that were voted on by the public involved: Consult, Involve, Collaborate and Empower.