Counsel: City doesn’t need voter approval for bond sale

Funds raised would be used for wastewater facility expansion

Yuma does not need voter approval to issue a sale of utility bonds, as has been alleged by some citizens.

A bond counselor tried to clear up the confusion on Wednesday, when the council introduced an ordinance authorizing the sale of utility bonds to pay for the expansion of the Desert Dunes Water Reclamation Facility.

Paul Gale of Greenberg Traurig, one of the firms advising the city, said he thinks the confusion arose from an Arizona League of Cities and Towns publication listing the borrowing powers of municipalities, which the bond counselor noted is not incomplete. Gale clarified that the city has several borrowing powers that don’t require voter approval, including the sale of utility bonds such as the one currently being proposed. He explained that this authority has been in place since the 1960s and has been confirmed by the Arizona Supreme Court.

“The bonds are legal, valid and binding, period,” Gale said. “Investors would not buy the obligations unless they have that opinion from my firm.”

The ordinance is expected to be adopted by the council on Dec. 15, which would allow the transaction to proceed. If adopted, the bond sale would hit the market on Dec. 16.

The public bond sale would raise $73 million. A premium fee would raise the amount owed to $86.8 million.

Mark Reader of the financial advisory firm Stifel, Nicolaus and Co. said that with Yuma’s A+ and AA- credit ratings, the city can expect to lock in on “very low” interest rates up to 1.88%.

“At the moment, the market is in our favor,” Reader said.

The city would repay the bonds from revenues from the water and wastewater fees paid by residents. “Just the net revenues, not a property tax, not the general fund,” Gale said.

Reader previously noted that the city’s wastewater enterprise system is a “healthy” $22 million business with expenses just under $11 million. Therefore, the city can pay off the debt without raising the utility rates paid by residents.

The bonds are expected to be paid off in 2041, with annual payments running from $2.56 million in 2022 to $6.37 million in 2041.

Only one speaker asked to address the proposed ordinance. Branden Freeman asked why it came with an emergency clause. Gale explained that it’s common for municipalities to use emergency clauses with bond sales. In this case, he said, the council wants to declare an emergency in order to act quickly because “the interest market is good now.” Otherwise, he added, the city would have to wait 30 days before selling the bonds.

Desert Dunes, located on Avenue 6E, just south of 32nd Street, was constructed in 2005 with a capacity of 3.3 million gallons per day. The facility serves the east side of the city, which has rapidly grown in the last few years, placing increased demand on the plant.

Consequently, the council made the expansion of Desert Dunes a priority. The planned expansion would double the capacity to 6.6 million gallons per day.

Another factor adding to the urgency is the rising costs of construction. A few months ago, city staff had estimated the cost to complete the project at $80 million. The current estimate is somewhere around $86 million.