When the City identifies the need to construct a capital project, various financing options are considered. Issuing debt to finance a project may be the best method for the following reasons:
- prevents the depletion of City reserves
- allows the cost of the project to be spread over many years so that future residents can help to pay for the infrastructure that they are using
- allows projects to be built sooner so that residents receive the benefit when needed
The most common way the City goes into debt is by issuing bonds. After the City receives voter authorization and is ready to proceed with approved capital projects, the City issues (sells) bonds and the outstanding debt increases. Each year, the City also retires (pays off) a portion of debt issued in prior years.
As of June 30, 2015, the City’s total outstanding bond debt was $1,543,935,961. To put this number in perspective, Mesa’s total bond debt per resident is $3,389. The chart on the right shows how Mesa compares with its neighboring cities. For more details, check out the state Report of Bonded Indebtedness. This report compiles bond debt reported by fiscal year for all municipalities in the state of Arizona.
The outstanding debt balance is paid back over time through annual principal and interest payments (debt service payments). When debt is issued, it obligates the City to make regular payments for periods of up to 30 years. The City’s goal is to have consistent debt service obligations, creating a stable financial environment for providing sustainable services to residents.
Total budgeted debt service in FY 2016/17 is $177,269,743, representing 10.6% of the City’s operating budget. The budget also includes debt service of $185,102,963 for potential bond refundings (refinancings).