Pinal County officials held a statutory public hearing last week to discuss a proposed $346 million bond issuance to refinance existing debt, address pension obligations, and fund new capital projects. The April 30 hearing fulfilled requirements under Arizona Revised Statute 11-391, which mandates public discussion before counties incur long-term financial obligations.
Three-Part Proposal
County financial leaders outlined a three-pronged approach to debt management and capital funding during the presentation. According to Angie Woods, Director of Office of Budget and Finance, the proposal includes:
- Refinancing approximately $50 million in bonds from 2014-2015 to take advantage of lower interest rates
- Addressing the county’s $106 million unfunded liability with the Arizona State Retirement System (ASRS)
- Funding $190 million in new public works projects within the county
Refinancing Opportunities
Mark Reader from Stifel Nicolaus explained that bonds issued 10 years ago for infrastructure projects are now eligible for refinancing after a decade-long lockout period.
“In 2014 and 2015, the county issued some bonds for various road projects, widening of Ironwood-Ganzel Road, some detention facilities, some very much needed public infrastructure projects in the county,” Reader said.
The specific projects funded included Hunt Highway Improvements, Public Safety Radio Upgrades, Ironwood Drive Improvements, widening and improving Ironwood/Gantzel Road, Adult Detention Facility Expansion, Sheriff’s Training Facility, and Juvenile Detention Facility.
The current bonds have interest rates averaging about 4.6% (ranging from 3.25% to 5%), but officials are aiming for rates in the 3.25% to 3.5% range, with recent estimates around 3.4%, depending on market conditions. This refinancing could generate approximately $3 million in net debt service savings and about $2.5 million in net present value savings over the life of the bonds, though Reader emphasized they would only proceed if market conditions deliver the desired level of savings.
Pension Liability Solution
Omar Daghistani, a public pension expert, detailed the plan to address the county’s portion of ASRS’s unfunded liability. Pinal County currently owes $106 million as its share of the retirement system’s $16 billion total unfunded liability. This liability stems from several factors including increased life expectancy, a more conservative discount rate, prefunding of permanent benefit increases, and a change in liability accrual method.” Daghistani said. “They’ve received numerous awards.”
The plan involves issuing taxable bonds at an estimated borrowing cost of 5.6% while the pension fund has demonstrated a 10-year annualized return of 7.6%. The savings projections are based on a 7.0% assumed return, with higher or lower savings depending on ASRS performance over time. Initial projections showed $13.2 million in present value savings, but improved market conditions by the hearing date increased that estimate to $16.3 million on a present value basis and $62 million on a cash flow basis.
New Capital Projects
The $190 million in new money would fund six major projects:
- Administration Building (Phase 1): A five-story, 125,000 square foot building estimated at $73 million
- Facilities Management Office & Warehouse: Two one-story buildings totaling 30,000 square feet at $17 million
- Fleet Services & Radio Shop Building: A one-story, 78,000 square foot facility at $32 million
- Sheriff’s Office Re-Entry Program Building: A 28,000 square foot, two-story addition to the existing facility costing $16.5 million
- Juvenile Court Building: A 70,000 square foot, three-story building at $43 million
- Apache Junction Offices & Community Space: A 7,500 square foot, two-story building at $8.5 million
The capital projects would be funded through $190 million in new bonds, with total debt service—including interest—estimated at approximately $361 million over 30 years. Annual debt service payments of approximately $11.9 million are expected to be paid from county excise tax revenues, which are the planned funding source but are not legally pledged and remain subject to annual appropriation by the Board of Supervisors.
The Sheriff’s Re-Entry Program, which received vocal support during public comments, focuses on helping former inmates successfully transition back into the community, providing skills and support that help reduce recidivism and improve community safety.
Revenue Growth and Debt Coverage
During discussion about repayment, Supervisor Jeff McClure asked Woods about revenue growth projections.
“When we look at paying this back, we’re looking at the growth of the county over 30 years…what are our growth projections running right now?” McClure asked.
Woods responded in detail about the county’s revenue projections. She explained that primary property tax growth depends on net assessed valuation, which has been ranging from 6% to 11% over the past several years. This growth comes from both new construction and increased values of existing properties. For the excise taxes that would secure the bonds, Woods noted two different trends: the county’s share of statewide sales tax is growing at about 3% annually, while the local county sales tax is currently growing at just over 10% this fiscal year. She emphasized they haven’t seen negative changes in these revenue streams, even during challenging periods like the COVID pandemic.
Despite these strong current numbers, financial planners are using a much more conservative 3-4% growth projection when calculating debt service coverage in their financial models. Woods also mentioned that the county has been reducing the property tax rate over the past 4-5 years and plans to continue doing so. This conservative approach, as Supervisor McClure noted, gives the county a buffer to “weather the downturns” that might come during the 30-year repayment period.
The county’s historical revenue data shows steady increases in excise tax collections, with total county excise tax revenues reaching nearly $109 million in fiscal year 2023-24.
Public Comments
Eight written comments were read into the record during the hearing, with opinions split on the proposal. Some expressed concern about interest costs, while others supported the investment in county facilities.support is critical,” wrote Margaret Hill from Queen Creek.
Three citizens spoke in person at the hearing, primarily supporting the Sheriff’s Re-Entry Program’s inclusion in the projects. Two former participants credited the program with changing their lives and helping them become productive community members.
County Recorder Dana Lewis also spoke in favor of the proposal.
“We’ve already discussed the unprecedented growth that Pinal County has gone through. And we can also look back to a few years back where we weren’t forward-thinking, and it came back and it got us,” Lewis said. “The fact that we’re moving forward, looking at their growth and trying to be proactive for our residents, is something to be looked at in a positive manner.”
Road to Implementation
According to the proposed timeline, the Board of Supervisors will consider adopting a resolution authorizing the issuance of bonds at their May 28 meeting. If the Board adopts the resolution and market conditions remain favorable, officials anticipate entering the bond market by mid-July with a tentative closing date around July 30.
