Big A’s: Tucson’s Bright Prospects Shine as Bond Agency Reports Positive News

Tucson has received a positive boost in its bond ratings, with Moody’s upgrading the city’s outlook from “stable” to “positive.” This change reflects the city’s robust economic growth, which outpaces national averages. City officials believe this adjustment could lead to lower bond rates and, consequently, reduced taxes for residents.

According to Moody’s, the upgrade is a testament to Tucson’s demonstrated financial management and the positive trajectory of its economy. The agency noted, “The positive outlook on the city reflects the expectation that the city’s economy will grow supported by new developments and that its financial position will remain sound,” highlighting the city’s capability for timely budgetary adjustments.

City officials are understandably pleased, as Tucson’s financial situation has significantly improved since the challenging fiscal landscape of the mid-2010s. Their efforts, along with supportive local journalism, appear to have positively influenced this outcome.

The city’s recent issuance of $51 million in new bonds received an Aa3 rating, while Tucson Water revenue bonds totaling $75 million were rated at Aa2. In general, the city’s outstanding bonds remain stable, reaffirmed at Aa3 for $1.2 billion in general obligation bonds.

General obligation bonds, secured by local real estate values, present a low risk of default for Tucson. The only significant risk lies in the unlikely scenario of residents relocating en masse. While property taxes primarily support these bonds, Tucson has alternative options for payment, provided they do not disrupt operational budgets.

This upgraded bond rating is expected to save the city approximately 0.05 to 0.1 percentage points in interest on the new bonds issued. By efficiently managing its debt, Tucson stands to save around $210,000 on the newly issued general obligation bonds and nearly $1 million on water revenue bonds over the duration of their lifespan.

Financial leadership within the city has adopted a prudent approach by favoring shorter-term debt amidst high interest rates, contrasting with past strategies that involved long-term borrowing during periods of lower rates. Certificates of participation, often linked to projects like parking facilities, carry more risk but provide alternative financing avenues for the city’s needs.

While manageable debt can facilitate growth, Tucson officials recognize the fine line between beneficial and burdensome debt. Investment in substantial, one-time projects justifies the responsible use of bonds, creating opportunities for future revenue streams.

Moody’s assessment is ongoing. The ratings agency monitors multiple municipalities, emphasizing economic strength and well-managed spending. Tucson’s current fiscal landscape, bolstered by the University of Arizona and Davis-Monthan Air Force Base, positions it favorably, boasting an estimated $74 million surplus for fiscal 2024.

However, uncertainties loom on the horizon. Discussions of potential trade conflicts with Mexico and significant cuts to federal spending could threaten Tucson’s economic health. The University of Arizona’s reliance on federal funding underscores the potential consequences of such measures.

Moreover, a recent study revealed that bond ratings are adversely affected by the decline of local journalism. Communities with reduced media oversight tend to see increased spending and deficits, highlighting the crucial role that watchdog reporting plays in maintaining fiscal accountability.

Ultimately, Tucson’s upward trajectory in bond ratings reflects both economic resilience and the importance of active civic engagement. As the city navigates challenges ahead, continued vigilance and transparency will be vital in securing its financial future.