When the City identifies the need to construct a capital project, various financing options are considered. Issuing debt to finance a project may be the best method for the following reasons:
- avoids the depletion of City reserves
- allows the cost of the project to be spread over future years so that residents pay for the infrastructure that they are using
- allows projects to be built sooner so that residents receive the benefit when needed
Issuing bonds is the most common method for the City to finance a project with debt. After the City receives voter authorization and is ready to proceed with a capital project, the City issues (sells) bonds and outstanding debt increases. Each year, the City also retires (pays off) a portion of debt issued in prior years.
As of June 30, 2018, the City’s total outstanding bond debt was $1.8 billion. To put this number in perspective, Mesa’s total bond debt per resident is $3,748. The chart above shows how Mesa's debt per capita compares with neighboring cities. For more details, check out the State's Report of Bonded Indebtness. This report compiles bond debt reported by fiscal year for all municipalities in the state of Arizona.
The outstanding debt balance is paid back over time through annual principal and semi-annual interest payments (debt service payments). When debt is issued, it obligates the City to make regular payments for periods of up to 30 years. The City’s goal is to have consistent debt service obligations, creating a stable financial environment for providing sustainable services to residents.
The FY 2019/20 budget for existing debt service is $217 million, representing 12% of the City's operating budget.