Bond Descriptions

Bond and Long Term Payment Types Currently in Use

General Obligation (GO) bonds are backed by the full faith and credit of the issuing municipality. The bonds are secured by the ad valorem (property tax) taxing power of the city. The Arizona Constitution provides that general obligation bonded indebtedness for a city for general municipal purposes may not exceed six percent (6%) of the net assessed full cash property valuation of the taxable property in that city. In addition to the six percent (6%) limitation for general municipal purpose bonds, cities may issue general obligation bonds in an amount up to an additional twenty percent (20%) of the net assessed full cash property valuation for supplying such city with water, artificial light or sewers, and for the acquisition and development of land for open space preserves, parks, playgrounds and recreational facilities, public safety, and streets and transportation facilities. In order for GO bonds to be authorized for a specific public project, the bond issue must first be approved by a vote of the citizens.

Municipal Property Corporation (MPC) is a non-profit corporation created in 1967 by the city as a financing mechanism for the purpose of financing the construction or acquisition of capital improvement projects for lease to and use by the city. The MPC is governed by a board of directors consisting of citizens from the community approved by the City Council. MPC bonds are secured by the city's lease payments which are in turn secured by city excise tax and other undesignated general fund revenues. These bonds may be issued without a vote of the citizens.

Water and Sewer Revenue bonds are secured by the revenues generated from the project or system. There is no maximum debt limitation for Revenue bonds, however, each issue is required to have annual dedicated revenues equal to at least 1.2 times the annual debt service. In order for Water and Sewer Revenue bonds to be authorized, the bonds issue must first be approved by a vote of the citizens.

Improvement District (ID) bonds are sold by special purpose districts that are formed by property owners in a designated area within the city who agree to be assessed for the repayment of the costs of constructing improvements which benefit their property. The city is the repayment source of last resort to a bondholder should a property owner default on his assessment. ID bonds are secured by a lien on the property and improvements of all parcels in each district. ID bonds are typically issued to finance local street, water or sewer improvements; or to acquire an existing water or sewer operation.

Certificates of Participation (COP) lease-purchase agreements are entered into with a Trustee or Lessor, for the acquisition, operation and/or maintenance of a project. COPs are secured by annual budget appropriation made by the city. If the city does not make an appropriation sufficient to pay lease payments in a year, the Lease will terminate, and the city is required to vacate and return possession of the Project to the Trustee. These types of long term payment agreements do not require a vote of the citizens.

Bond and Long Term Types Not Currently in Use

Highway User Revenue Fund (HURF) bonds are special revenue bonds issued specifically for the purpose of constructing street and highway projects. These bonds are secured by gasoline tax revenues collected by the State and distributed to cities and towns throughout the State based on a formula of population and gas sales within the county of origin. These bond issues must first be approved by a vote of the citizens.