Pima County Administrator Chuck Huckelberry advised the Bond Advisory Committee Friday against seeking voter support for new investments in jobs, roads, parks and other amenities until 2014 at the earliest.
Huckelberry said the tepid financial recovery combined with a seeming reticence of local voters to support increased investment in the last election cycle makes 2013 impractical.
The shrinking tax base is another consideration, he suggested. Since 2009, the local tax base has contracted by more than 17 percent – and relief isn’t coming soon. Since recovery of the tax base historically lags the larger economy by two to three years, Huckelberry explained, the tax base is expected to decrease
overall by an estimated 26.5 percent by 2015, before it would begin to stabilize.
As a general rule, a smaller tax base means tax rates must increase to achieve a constant levy.
The County, however, has long tried to protect voters from dramatic swings in the tax rate. In the 2004 bond election, voters were assured that the County would voluntarily ensure a property tax rate cap of 81 cents per $100 of assessed valuation. With the shrinking tax base, it wouldn’t be possible to issue any new general obligation bond debt without exceeding that voluntary cap in the immediate future, he said.
If voters approved a bond package in 2014, however, new debt wouldn’t be issued until 2015. Spending would also be relatively moderate initially, since most projects will be in the less-costly design phase, with construction to follow in subsequent years.
The County has relied on other conservative principles in managing its debt, he noted, including rapid repayment of debt. While some general obligation bond programs are paid back over as many as 25-30 years in other jurisdictions, the County has traditionally adhered to a 15-year repayment schedule, with 80 percent of bond debt repaid within 10 years. Sound management practices help the County retain a high credit rating, Huckelberry said, adding that those policies should continue, even in the face of increased economic stress.
Since 1974, the County has been authorized to spend $1.3 billion in general obligation bonds and has so far issued all but $78 million of it. In all, $773 million has already been repaid.
The Bond Advisory Committee is expected to call an informational meeting in the coming weeks to discuss the results of a special audit conducted by the state Auditor General’s office of the Pima County bond program. The audit, which was requested by the state Legislature, has a statutory deadline for completion by Feb. 1.