City of Phoenix General Obligation Refunding Bonds Series 2016 Investor Presentation August 2016
Disclaimer Certain statements included or incorporated by reference in the Preliminary Official Statement and this presentation constitute “forward ‐ looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as “plan”, “expect”, “estimate”, “anticipate”, “forecast”, “budget”, or other similar words. The achievement of certain results or other expectations contained in such forward ‐ looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward ‐ looking statements. Neither the City of Phoenix nor any other party plans to issue any updates or revisions to those forward ‐ looking statements if or when their expectations, or events, conditions or circumstances upon which such statements are based occur. 1
Presenters $232,160,000* General Obligation Refunding Bonds, Series 2016 Denise Olson, Chief Financial Officer City of Phoenix Jeff Barton, Budget & Research Director City of Phoenix Peter J. Phillippi, Managing Director Piper Jaffray & Co. Senior Managing Underwriter * Preliminary, subject to change. 2
Financing Overview Par Amount $232,160,000* Tax Status Tax ‐ exempt Amortization Serial maturities from July 1, 2018 through 2019; 2023 through 2027* Security The bonds are direct and general obligations of the City and are payable both in principal and interest from ad valorem taxes which may be levied on all taxable property therein without limitations as to rate, but within the limitation as to amount prescribed by law. Use of Funds Refund certain outstanding General Obligation Bonds of Series 2007A and Series 2007B* Optional Redemption Subject to optional redemption on or after July 1, 2026 at par* Ratings S&P AA+; Moody’s Aa1 Sale Date August 23, 2016* Settlement Date September 13, 2016* Senior Manager Piper Jaffray & Co. *Preliminary, subject to change. 3
Agenda • Overview and Economic Information • City of Phoenix Budget • Phoenix Housing Market & Property Taxes • Debt Profile and Plan of Finance • Investor Relations & Contact Information 4
Overview and Economic Information 5
City of Phoenix Overview • 6th largest city in the U.S. based upon population • Phoenix is the largest city in Arizona, the State Capitol, the County Seat and the economic and cultural hub of the region Largest Cities in U.S. • Greater Phoenix accounts for approximately 73% of Arizona’s City Population total employment New York 8,175,133 • Vibrant and strategically located economic center with a healthy Los Angeles 3,792,621 mix of employment that continues to expand Chicago 2,695,598 Houston 2,100,263 • Well developed and new infrastructure systems in place Philadelphia 1,526,006 Phoenix 1,447,128 • Median home prices low compared to similar major cities Source: U.S. Census Bureau, 2010. • Greater Phoenix unemployment rate of 4.6%* continues to outperform the national rate 6 * as of January 2016
Core Phoenix Economic Strengths • Large, diverse employment base o Achieved 10,000 new jobs through attraction and expansion efforts in fiscal year 2015 ‐ 16 o Health Care, Education, Manufacturing, Financial, Retail, Resorts, Governments and Schools o Large Base of Employers/Corporate and Regional Headquarters • Established Higher Education Institutions o All three State public universities have campuses in Phoenix; plus community colleges and private universities • Efficient Transportation Systems o Air, rail, interstate and robust highway system • Vibrant Downtown o Convention & Hotel Destination o Host of 2017 NCAA Final Four Fan Fest 7
Financial Overview • Strong economic recovery, including the housing market • Conservative debt profile with long ‐ term fiscal management On July 1, 2016, the City Council adopted a property tax increase o The increase allows the City to maintain healthy reserves o • Pensions Fully funded annual required contribution (ARC) for all pension systems o Significant pension reform for affordable and sustainable plans o OPEB ARC fully funded since 2007 • Budget • City Charter & State law require a balanced budget o Transparent budgeting process; zero ‐ based budget o 8
City of Phoenix Budget 9
Budget Review Process Budget Review Process: • The Budget & Research and Finance Departments closely monitor revenues and expenditures on a monthly basis and, if actuals deviate from the budget, take quick and prudent action to address any variance • City departments prepare revised expenditure estimates twice a year Mid ‐ year revenue shortfalls can result in mid ‐ year expenditure reductions • Budget & Research keeps the City Manager and the City Council advised on • the status of the budget through periodic budget status reports 10
2016 ‐ 17 Approved Budget • City Council voted on July 1, 2016 to increase property taxes by $0.35 per $100 of valuation to ensure debt service needs are met; expected to generate an additional $37 million in FY 2016 ‐ 17 for G.O. debt service • General Fund balanced budget of $1.1 billion 2016 ‐ 17 Budget Highlights: • Additional public safety employees and equipment • Programs for youth and veterans Added community services in public transit, parks, libraries, • sanitation, and streets Gradual restoration of employee compensation concessions • over the next three years 11
General Fund Financial Data General Fund Activity (Budgetary Basis) (in thousands) Actual Estimated FY 2014 ‐ 15 FY 2015 ‐ 16 Resources: Beginning Balance $ 78,579 $ 100,435 Revenues 1,052,589 1,068,480 Recoveries 969 1,000 Transfers 19,693 501 Total Resources $1,151,830 $1,170,416 Expenditures: Operating $1,049,986 $1,064,850 Capital 1,409 4,120 Note: The adopted General Fund Total Expenditures $1,051,395 $1,068,970 budget for fiscal year 2016 ‐ 17 Ending Fund Balance $ 100,435 $ 101,446 expenditures is $1.1 billion. 12
Phoenix Housing Market & Property Taxes 13
Property Tax Overview Housing prices have recovered, rising significantly since 2012 • • As of December 2015, median housing prices for existing (resale) homes increased 9.0% since December 2014 Phoenix median housing prices remain low relative to major western cities • such as Los Angeles, San Diego, Salt Lake City, Seattle, Austin, and Denver The County Assessor’s preliminary limited net assessed valuation shows an • increase of 3.8% in fiscal year 2016 ‐ 17 • Arizona voters approved the Property Tax Assessed Valuation Amendment in 2012 limiting annual AV growth to 5% plus new construction, but does not put any restrictions on the secondary property tax rate Arizona Revised Statute § 35 ‐ 458 limits the secondary property tax levy to • the annual debt service amount plus a reasonable delinquency factor; this amount can also include anticipated new money issues and defeasances 14
Property Tax Rate Increase Fiscal year 2016 ‐ 17 rate increase approved on July 1, 2016 • Increased to $2.17 per $100 of assessed value from $1.82 – • The rate increase was the result of coordination among the City Council, City Manager’s Office, Finance Department, and Budget & Research Department Shows the City is willing to take action to protect G.O. bondholders – Preserves General Fund programs and services – Allows for critical service restoration and additions to City services – Allows for strategic use of the General Obligation Reserve Fund to • help pay debt service while retaining a six to nine month reserve balance • City will annually assess the Property Tax Policy and G.O. Bond Program and update if necessary 15
Debt Profile and Plan of Finance 16
Outstanding G.O. Bonded Debt • Outstanding G.O. Bonds (July 1, 2016) = $1,336,715,000 • Short Average Life Estimated Principal Due within 10 years after 2016 Refunding = $911,920,000 (71% of total) Final Maturity = July 1, 2034 • Strong reserve fund balance and liquidity G.O. Reserve Fund Balance = $112 million • No derivatives or variable rate exposure • No pension obligation bonded debt outstanding 17
General Obligation Bonded Debt Statistics Bonded Debt Outstanding as of 7 ‐ 1 ‐ 2016 $1.34 billion G.O. Reserve Fund Balance as of 7 ‐ 1 ‐ 2016 ( estimated ) $112 million Bonded Debt Outstanding $1.22 billion Bonded Debt Per Capita ( 2015 population estimate ) $801.42 Full Cash Value FY 2016 ‐ 17 $140.1 billion Bonded Debt as a % of Full Cash Value 0.87% Limited Net Assessed Value FY 2016 ‐ 17 $11.0 billion Bonded Debt as a % of Limited Net Assessed Value 11.1% 18
Plan of Refunding ($ in millions) • Refund and restructure Principal To Be Series Refunded* approximately $276.1 million* 2007A $ 259.1 • Overall debt service is not increased 2007B 17.0 Total $276.1 • Restructuring does not extend final maturity of bonds being refunded • Estimated Gross Savings of $15.4 million* *Preliminary, subject to change. 19
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