Council Report

City of Mesa — City Council (2026-04-06)

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City Council Report 
 
 
Date:  
April 6, 2026 
To: 
 
City Council 
Through: 
Scott Butler, City Manager 
 
 
Michael Kennington, Deputy City Manager/Chief Financial Officer  
 
From:  
Mark Hute, Treasurer 
 
 
  
Subject: 
Sale of 2026 Utility Systems Revenue Obligations 
 
 
Purpose and Recommendation 
 
The purpose of this item is for the City Council to authorize the sale of utility systems 
revenue obligations to (1) finance utility systems capital projects and to (2) refund 
(refinance) existing utility debt over the same timeframe at a lower cost. 
 
It is recommended that the Council authorize the sale of the following debt issuances: 
 
 Utility Systems Revenue Obligations, Series 2026A (the “Series 2026A 
Obligations”)  
 Utility Systems Revenue Obligations, Series 2026B* (the “Series 2026B 
Obligations”) 
Combined Principal: not-to-exceed $341,000,000 
 
*The Series 2026B Obligations are issued for capacity fee projects 
 
 Utility Systems Revenue Refunding Obligations, Series 2026 (the “Series 2026 
Refunding Obligations”)  
Principal: not-to-exceed $225,000,000 
 
Background 
 
The City operates and maintains water, wastewater, natural gas, and electric utility 
systems, in addition to solid waste collection and disposal services.   
 
The City regularly issues new debt to finance capital spending on its utility systems.  
Financing long-term utility infrastructure allows the City to meet its capital needs while 
allowing for customers who benefit from the infrastructure to pay for it as it is being 
used.    
 
The proposed refunding is similar to refunding transactions that the City has completed 
in previous years. It reflects the City’s ability to take advantage of lower interest rates 
to achieve debt service savings for the City.

2 
 
Discussion 
 
New Project Spending 
 
The City plans to use the proceeds from the proposed utility obligations to pay for the 
purchase, design, and/or construction of capital projects through calendar year 2026 
(although project spending may vary).   
 
Table 1 below shows planned project spending for the Series 2026A Obligations and 
the Series 2026B Obligations.   
 
Table 1: Proposed 2026 Utility Systems Revenue Obligations Proceeds 
 
Utility System 
Series 2026A 
Obligations 
Series 2026B 
Obligations 
Total 
Natural Gas 
  $   31,000,000 
$                   0 
$   31,000,000 
Wastewater 
33,000,000 
12,000,000 
45,000,000 
Water 
115,000,000 
150,000,000 
265,000,000 
Total 
$ 179,000,000  
$ 162,000,000  
$ 341,000,000  
 
Attachment A – Project List is a list of projects planned to be funded with the proceeds 
of the Series 2025A Obligations. 
 
Attachment B – Capacity Fee Project List is a list of projects planned to be funded with 
the proceeds of the Series 2025B Obligations. 
 
Refunding (Refinancing) Existing Debt 
 
The proceeds from the sale of the Series 2026 Refunding Obligations would be used 
to redeem (pay off) or partially redeem existing Utility Systems Revenue Bonds issued 
between 2013 and 2016 (the “Bonds Being Refunded”).  
 
The Series 2026 Refunding Obligations would replace the Bonds Being Refunded with 
maturities through 2038 at a lower cost, after accounting for all transaction costs. The 
savings would accrue to the City’s utility debt service fund.  
 
Structure 
 
Attachment C – Debt Service Table shows the structure of existing utility debt service 
from bonds and obligations, estimated debt service savings from the proposed 
refunding transaction, and new debt service resulting from the other proposed 
issuances.     
 
The proposed utility obligations meet the City’s legal revenue coverage requirements 
and other parity tests.

3 
 
Timeframe 
 
The City is scheduled to price the proposed Series 2026A Obligations and Series 
2026B Obligations the week of May 25 and close the transaction (receive the 
proceeds) on June 25. 
 
The City is scheduled to price the proposed Series 2026 Refunding Obligations the 
week of May 4 or 11 and close the transaction on June 4. 
 
Alternatives 
 
The Council may choose not to proceed with the sale of the proposed utility obligations 
at this time.  The City could: 
• cancel new debt-funded projects still in the planning stage 
• utilize reserves to pay cash for projects already in progress 
• pay higher than market interest rates on the Bonds Being Refunded 
 
These alternatives are not recommended as they would reduce City reserves or 
prevent completion of capital projects that are in various stages of planning and 
construction. Cost savings would not be realized in the refunding transaction. 
 
Fiscal Impact 
 
Debt service on the proposed utility obligations is included in the City’s utility fund 
forecast.  New utility debt service is paid from (1) revenue collected through utility rates 
charged by the individual utilities and (2) revenue collected from capacity fees. Debt 
service from the new issuances is structured so that, when combined with the City’s 
current outstanding debt, a stable overall debt structure is achieved.   
 
Until the Series 2026 Refunding Obligations are issued, municipal debt market 
conditions would be monitored to ensure that the transaction would have a net present 
value savings exceeding 3% of the debt service amount on the Bonds Being Refunded, 
as required by the City’s financial policies. 
 
Preliminary savings estimates from the proposed refunding transaction are shown in 
the Table 2 below: 
 
Table 2: Estimated Refunding Savings 
 
Estimated Savings  
$  
(Gross) 
Estimated Savings  
% of debt service 
(NPV) 
$13.6 million 
4.2%

4 
 
Coordination 
 
The legal documents for the debt issuance are prepared by Zach Sakas at Greenberg 
Traurig, the City’s special counsel. 
 
The City’s municipal advisors, Janelle Gold and Zac Lara at Hilltop Securities, prepared 
many of the schedules and other financial information included in the issuance 
documents.   
 
The following City departments coordinated on the proposed utility obligations 
issuances: 
• City Attorney  
• City Manager 
• Energy Resources 
• Engineering 
• Finance 
• Management and Budget 
• Water Resources