Title
2028 General Obligation Bond Program Development and Report of the Fiscal Capacity Committee - Citywide
Description
This report provides information regarding a potential 2028 General Obligation (GO) bond program, documents the findings of the Mayor and City Council-appointed Fiscal Capacity Committee, requests approval of the size of the GO bond program, and proposes requirements for non-profit partners requesting consideration in the GO bond program.
THIS ITEM IS FOR DISCUSSION AND POSSIBLE ACTION.
Report
SUMMARY
GO bond programs are funded through secondary property tax assessments and provide a mechanism to fund construction and rehabilitation of City facilities and infrastructure such as parks, libraries, fire stations, streets, senior centers, and storm drains. They require voter approval and cannot be used to fund operating costs like staff salaries or to fund assets that are not owned by the City. Since 1957, the City's approved GO bond programs have totaled $5.1 billion. The most recent GO bond program for $500 million was approved by voters in 2023.
In approving that 2023 GO bond program, Mayor and Council laid the foundation for future programs of similar sizes, in approximately five to seven-year increments. The 2023 GO bond program is well underway, with approximately 24 percent of funds spent through August 2026. Significant projects already completed or under construction include Fire Station 15 Replacement, Mountain View Community Center Sports Complex Improvements, Rio Reimagined Land Acquisition, and Affordable Housing Property Preservation. Project status updates are published regularly at phoenix.gov/bond. The success of the 2023 program underscores the importance and benefit of regular GO bond programs and sets a backdrop for the Fiscal Capacity Committee’s recommendations on a 2028 program.
REPORT OF THE FISCAL CAPACITY COMMITTEE
In May 2026, Mayor and Council appointed a GO Bond Fiscal Capacity Committee (Committee) in preparation for a 2028 GO bond program (Attachment A):
Ron Butler, Chair
Tanya Amezquita
Toni Maccarone
Joseph Palomino
Steve Zabilski
Mayor and Council charged the Committee with making recommendations on the financial parameters of the bond program, including program size and cost considerations for operations and maintenance. Mayor and Council asked the Committee to base their recommendations on an assessed valuation forecast, forecasted debt service, and constitutional debt limits. Four Committee meetings were held:
August 11, 2026
August 18, 2026
August 25, 2026
September 1, 2026
This report summarizes the information presented to the Committee by staff and the Committee's recommendations. Meeting materials and minutes are transmitted as Attachment B.
Summary of Considerations
The principal and interest payments for the proposed GO bond program would be paid by secondary property taxes. Operations of GO bond-funded City facilities are primarily funded by the General Fund.
The City's ability to implement a bond program is dependent upon whether:
Secondary property tax revenue will be sufficient to fund principal and interest payments.
Capacity exists within constitutional debt limits.
The City’s credit ratings can be maintained.
The City can fund additional operations and maintenance costs associated with new systems and facilities.
Projects can be completed within an approximate five-year timeframe.
Bond Program Capacity
Having reviewed property tax revenue models, interest rate assumptions, and remaining debt service on existing general obligation bonds, the Fiscal Capacity Committee recommends that the City Council develop a $575 million bond program for a November 2028 election.
Absent unanticipated Legislative changes, or severe economic changes, the Committee advises that this bond program can be supported without any increases to the current secondary property tax rate of $0.7745 per $100 of net assessed valuation, even under modeled property valuation stress scenarios.
Peak debt service is not anticipated to rise substantially beyond the current maximum annual debt service of $145 million. A bond program of this magnitude is not expected to adversely impact the City’s credit ratings, and outstanding debt would remain below constitutional debt limits.
Further, the Committee advises this approach strategically positions the City for subsequent bond elections every five to seven years. The Committee reviewed models indicating that the City could also reasonably support a 2033 bond program valued at $625 million, and a 2038 bond program valued at $675 million. However, recommending values of hypothetical future bond programs is beyond the Committee’s scope of work, and future program sizes would be evaluated at that time.
Property Tax Implications
The City levies a primary and a secondary property tax.
The primary property tax is a revenue source to the General Fund, the Parks Fund, and the Library Fund. The State Constitution allows primary property taxes to grow by no more than two percent annually, plus the growth associated with new construction. The City’s primary property tax is currently at its maximum legally allowable rate and levy. The 2026-27 primary property tax rate is $1.2652 per $100 net assessed value, generating a primary property tax levy of $236 million. Staff's property tax model assumes that the primary property tax levy will continue to be maximized to fund existing programs and services.
The secondary property tax is a revenue source to pay principal and interest on GO bond debt. The City's 2026-27 secondary property tax rate is $0.7745 per $100 net assessed value, generating a secondary property tax levy of $144 million. State statute prohibits the City from levying a secondary property tax over its annual principal and interest payments on GO bond debt, except the City can maintain a reserve of up to ten percent of its annual principal and interest.
The amount of secondary property tax generated each year for a given tax rate is a function of:
Annual appreciation on existing property.
New construction.
Assessment ratios established by the state legislature.
The taxable value of existing real property is the lesser of its full cash value determined by the County Assessor, or an amount five percent greater than the prior year's taxable value - this taxable value is referred to as limited property value. Citywide, full cash value is approximately 90 percent higher than limited property value. For valuation forecasts, this gap provides an important buffer against an economic downturn, making property tax forecasts relatively predictable.
The Committee endorses the following baseline property valuation model assumptions:
Annual net appreciation on existing property of 2.0 percent through 2027-28, recognizing reductions to commercial property assessment ratios approved by the Legislature.
Annual net appreciation on existing property of 3.0 percent thereafter.
Annual year-over-year growth on new construction of 2.0 percent.
No change to legislatively-determined assessment ratios after 2027-28.
The resulting model was used to determine projected secondary property tax rates for various bond program scenarios.
The Committee reviewed stress-test scenarios in addition to this baseline model.
State Statute places restrictions on assumptions conveyed in materials distributed to voters. For the first five years, growth assumptions in voter materials cannot exceed the average appreciation in the prior 10 years; thereafter, growth assumptions in voter materials cannot exceed 20 percent of the average appreciation in the prior 10 years. Modeled growth assumptions endorsed by the Committee for the first five years are similar to those required by statute, while statutorily-required assumptions thereafter are substantially lower. As a result, projected tax rates conveyed to voters in later years will be higher than those the Committee believes are likely.
The Committee additionally reviewed a hypothetical scenario similar to the 2008 financial crisis.
The Committee advises that the recommended bond program can be executed without increasing the secondary property tax rate above the current level in any of the scenarios that the Committee reviewed.
Project Delivery
Voter expectations and regulatory requirements demand timely delivery of GO bond projects. Many GO bond program projects can be funded through tax-exempt debt, offering a lower borrowing cost than taxable debt. Tax-exempt bond proceeds must be 85 percent expended within three years of issuance to meet Internal Revenue Service regulations. Project delivery capacity is limited by project management, procurement, consultant, and contractor resources.
The Committee confirms that a $575 million bond program aligns with the City’s project delivery capacity.
Operations and Maintenance
Certain GO bond projects can result in ongoing savings to the City or can be operated at zero or negligible cost. Street transportation and flood control projects typically have minimal operating costs. Like-for-like replacement of an aging police precinct, library, or other facility can generate savings associated with more energy efficient building systems.
Projects that result in the construction of new facilities or expansion of existing facilities, however, require ongoing General Fund resources to cover new operations and maintenance costs. Operating new or expanded fire stations, libraries, senior centers, and parks, for example, often involves the hiring of new staff and higher costs associated with utilities and maintenance.
The Committee reviewed City staff’s General Fund multi-year forecast to assess the City’s ability to absorb such costs. In 2029-30 - the first year of the 2028 bond program - the multi-year forecast shows a mid-point General Fund surplus of $38 million.
However, long-range forecasting is unpredictable. The forecast is subject to economic variables, as well as budget variables including vehicle replacement, information technology, and major maintenance needs; City Council and community demands for new programs and services; and resource demands from future labor negotiation processes. If future year available resources are lower than forecasted, or reflect deficits, difficult tradeoffs may be required to ensure the General Fund remains balanced.
The multi-year forecast illustrates that the City anticipates being able to absorb the ongoing operating costs generated by the 2023 GO bond program. The projects in that $500 million program had original estimated operating costs of $27 million.
The Committee recommends that the 2028 GO bond program limit any new ongoing operating costs to a similar level as the 2023 GO bond program, with appropriate inflationary adjustments.
GUIDANCE FOR NON-PROFIT ENTITIES
The City has historically leveraged non-profit partners to operate projects constructed through its GO Bond programs. GO Bond funds have also been used to reconstruct or modify existing City facilities operated by non-profit partners.
In prior bond cycles, non-profit partnered projects have emerged through multiple channels, including identification by staff, proposals arising during GO Bond committee meetings, and formal requests submitted by non-profit organizations.
For Council consideration, staff have identified requirements for non-profit partners wishing to propose projects (Attachment C). Proposals meeting these requirements would be subject to review and prioritization by the future GO Bond Committee.
Among the key requirements proposed for Council to consider:
Limit of one project proposal per organization.
Organization is responsible for fully funding costs of operating and maintaining the project.
Funding amounts ultimately included in the Council-approved 2028 GO Bond program represent the maximum City funding. Cost overruns will result in a reduced project scope, increased funding requirement for the project partner, or project cancellation.
Funding is subject to negotiation and execution of required funding/operating agreements.
Organization must indicate the amount of funding they plan to provide for the capital project, and if cash is not already in hand to contribute, must provide evidence of past fundraising efforts on a similar scale. Although the proposed guidelines do not specify a minimum cost share, this may be considered by the future GO Bond Committee.
Letter of interest deadline of January 4, 2027, and project submittal deadline of March 1, 2027. City staff plan to hold an informational workshop in late January for organizations submitting letters of interest.
RECOMMENDED ACTION
Staff recommends that the City Council:
Approve the recommendations of the Fiscal Capacity Committee, including a 2028 GO bond program of $575 million, with total project operating costs at a level similar to the 2023 GO bond program, adjusted for inflation.
Approve the proposed requirements for non-profit entities.
Direct staff to identify prioritized and future capital needs for evaluation by a 2028 GO Bond Committee, to be appointed by Mayor and Council in the future.
Department
Responsible Department
This item is submitted by City Manager Ed Zuercher, Assistant City Manager Ginger Spencer, Deputy City Managers Cynthia Aguilar and Frank McCune, the Budget and Research and Finance departments and the City Engineer.