A little more than a week ago, Tucson officials quietly put out the city’s latest bond ratings.
Getting a new bond rating is not that noteworthy, except for one thing: Pima County has already formed a bond committee to put a bond worth hundreds of millions of dollars on the ballot next year and there is growing speculation that the Tucson City Council might have a similar ask next year.
If that happens, good credit ratings from Fitch, Standard and Poor’s and Moody’s become very, very important.
Last week, Tucson officials touted a slight increase in the city’s credit rating (which officials called “extremely high bond credit ratings,” for what it’s worth).
They highlighted some of the city’s strengths as they prepare to sell $114 million worth of bonds this summer tied to the voter-approved Prop 407 from 2018, along with $79 million in water bonds over the next two years.
To make sense out of the city’s situation, let’s do a hypothetical.
Paying off a $100 million bond at the city’s current bond market rate of 3.8% over 20 years would cost taxpayers (and their children at this point) less than if Moody’s came back with a slightly lower credit rating for the city — which would likely have led to a 4.5% interest rate.
Bottom line? That higher rate would put $10 million in taxpayer dollars in the pockets of lenders, instead of going to the police department or paving roads over that 20-year period. (It also would be enough to cover one year of the city’s much-debated fare-free transit policy.)
It’s important to note that bonds are sold over time, not all at once. That $10 million figure would fluctuate as lending rates normally do over time.
For the moment, members of the Tucson City Council haven’t said much publicly about a bond next year, despite getting pretty good scores from the three major credit rating agencies. (But county officials are really worried the city will put a bond on the ballot at the same time as the county does.)
And the city might ultimately choose a different financing mechanism — like increasing the sales tax — to find the cash to hire more firefighters, address pedestrian safety issues and fix transit.
Councilwoman Miranda Schubert said the current needs of the city outstrip revenues and she floated the idea at a recent council meeting to ask voters to approve funding for those three things. But there hasn’t been a formal discussion yet.
At least some council members have no appetite for another trip to the ballot box. Half the council — and the mayor — will be asking voters for another term in 2027, and the resounding defeat of the half-cent sales tax, known as Proposition 414, is still a fresh political scar even 18 months later.
And here’s a tidbit for the Tucsonans who are rooting for a public takeover of Tucson Electric Power: City officials recently learned that if the city had to bond for it, they could use future revenue the city would receive from electric bills to pay for that bond.
One last thought on the city side, the Colorado River negotiations and the long-term ability to provide potable water to thirsty Tucsonans impact the city’s water bond ratings.
“Tucson is exposed to natural capital risks from water-supply stress, acute physical risks from drought and monsoon-related flash flooding, and chronic physical risk from extreme heat,” an S&P analyst wrote last month. “We also view Colorado River water supply uncertainty and potential post-2026 allocation reductions as the city's most material long-term exposure, given Arizona's junior priority position.”
The 10-year Proposition 407 expires in 2028, but the city isn’t planning on paying off the bond until 2038. So, basically it’s a 10-year public works project, but a 20-year bond.
For the moment, the county’s bond rating is similar to the city’s. But that could change. The credit ratings re-evaluations are triggered when a jurisdiction is about to sell bonds.
Pima County officials have already signaled they’re ready to ask the voters to approve a bond next year, although the size of the bond and the projects inside the bond package have not been finalized.
If the voters approve the county bond package in November 2027, the county would get a new credit rating in 2028 when they prepare to sell bonds.
The county has some serious infrastructure issues with some of its aging buildings downtown and is moving entire departments out of old structures that no longer make sense to keep pouring maintenance dollars into year after year.
The prime example is the downtown library, which county officials are moving across the street instead of trying to keep up the maintenance needs of the decades-old 96,000-square-foot Joel D. Valdez library.
We’re not into building shaming, but the City of Tucson has openly talked about ditching the municipal courthouse at 103 E Alameda Street for decades.
The City of Tucson has a similar issue with its main court facility, with talks of moving to the new(ish) county consolidated courthouse down the block.
The city and the county have a number of ways to raise cash other than bonds, including:
Raising sales taxes (largely considered a regressive tax)
Raising property taxes (which are limited by the state)
Increase fees (ask the city about the pickleball fee fight)
Cut services (this a rabbit hole, beware)
It’s been more than a decade since the county last floated a general obligation bond (yep, they come in several different flavors) and there is a reason the county is a bit gun-shy about going back to the voters (although we’re sure the COVID era also was a factor in their political arithmetic for not asking voters to back a bond).
In 2015, the Pima County Board of Supervisors put seven measures on the ballot that would have paid for 99 capital projects worth an estimated $815.8 million.
Voters rejected all seven, including 52% voting against a $200 million bond for roads — the holy grail of bipartisan complaints.
For what it’s worth, the county had a slightly worse bond rating in 2015 than it does now, but interest rates were better a decade ago. If voters had approved the various measures, taxpayers would have paid between 2.9% - 3.2% in interest on those bonds if they sold them back then.1
Another consideration is labor and material costs now, versus financing them. Whether we are talking about more cops, fixing streets or renovating a courthouse, it is cheaper to do it today than a decade from now — even if we factor in today’s interest rates.
But there is a Faustian bargain when it comes to borrowing, the more you leverage assets, the greater the chance that credit ratings could decline.
On Tuesday night, the Pima County Board of Supervisors sent another message to the Trump administration: They don’t want another border wall at Quitobaquito Springs or anywhere else on Tohono O'odham land.
The supervisors passed a non-binding resolution during the night meeting, but it was Tohono O'odham Chairman Verlon Jose who really caught everyone’s attention.
In his short remarks, Jose spoke from the heart as he described the desecration of sacred tribal land as the Trump administration builds a wall near Quitobaquito Springs.
“In the previous construction of the wall, they blew up Monument Hill there, which was a known archaeological burial site which was marked and they blew right through it. Fragments of bones were found scattered all over that mountain,” Jose said.
The tribe is now in federal court suing to block federal officials from building a second wall at the spring, as well as anywhere else on tribal land.
ICE is back, so are the protests: Protesters marched through downtown Tucson to call for justice after two men, Lorenzo Salgado Araujo in Houston and Joan Sebastian Guerrero in Maine, were shot and killed by ICE agents, even though the Department of Homeland Security said neither man was a target, JJ Mckinney reports for KGUN. The Party for Socialism and Liberation organized the march and memorial to highlight the need to stand up for immigrant rights. The protests come as border czar Tom Homan said the Trump administration’s pause on most ICE traffic stops is only temporary while officials review enforcement policies.
Another 10 years to build: Tucson can keep its 100-year water supply status after state officials found the city has enough water to meet expected demand, which means the city can keep approving new homes for the next 10 years, Tony Davis reports for the Arizona Daily Star. Some water experts say the city’s status could be in trouble if Colorado River cuts force the state to take another look before 2034. But Tucson officials say they’re not worried because the city has other water sources and residents have been using less water than expected.
A colorful way to give back: The 30 painted panels from Tucson muralist Ignacio Garcia’s “Urban Sonoran” mural, which covered the old Johnny Gibson’s Downtown Market during renovations, are being auctioned off, Cathalena E. Burch reports for the Star. Money from the auction will go to local nonprofits and arts programs, with the panels on display and open for bidding during a special event Saturday at the Grand Tucson.
We don’t have any cool art work to auction off. But can we interest you in the sublime beauty of daily journalism?
Opting out: Cochise County’s lax requirements for building permits (which we highlighted last December) got the full-length feature treatment from Big Think. The county’s system is pretty unique. A homeowner can pay a couple hundred bucks to get an “Opt Out” permit for a single-family dwelling and build their house out of alternative materials like adobe or straw. It’s really popular and about one-third of new homes in the last decade were built with “Opt Out” permits.
Still waiting: U.S. Sens. Mark Kelly and Ruben Gallego are again asking FEMA to reimburse Pima County for housing asylum seekers, per Jorge Encinas at the Green Valley News. The pair of Democrats sent a letter this week calling for a nearly $10 million payment, which was a follow-up to a letter they sent in August. A federal judge in Illinois ordered the Trump administration in May to make payment to local jurisdictions that took on the cost of caring for asylum seekers, but so far the money has come through for Pima County.
Pima County Supervisor Steve Christy found himself in the rare position Tuesday night of arguing for more government spending.
The lone Republican on the board urged his colleagues to dip into county coffers after a federal grant for the Southern Arizona Rescue Association was cut.
There was just one awkward detail.
As Christy made his case, Supervisor Andrés Cano teased him about who actually made the cut: the Trump administration.
After spending much of the last year and a half defending federal cuts to county government, Christy suddenly found himself asking local taxpayers to replace one.
His motion was tabled until the board takes a broader look in a few months at local programs affected by recent cuts in federal grants.
1 We’re not accountants, but we assume some of you are. We recognize there are three major bond rating companies and the sale of $100 million in bonds all at once might change the interest rates offered, but it would be a much longer story explaining how, for example, the city has sold their Prop. 407 bonds over the years and what the interest rate was for each sale.