Payson Town Council Special Meeting August 21, 2024: Resolution 3409 Bond Issuance
Payson Town Council Special Meeting – August 21, 2024
This special meeting was held on August 21, 2024, from approximately 4:03 p.m. to 7:18 p.m. at the Town Hall Council Chambers, 303 N. Beeline Highway, Payson, Arizona. The sole purpose was to consider and vote on Resolution 3409, authorizing the issuance of up to $70 million in excise‑tax‑backed bonds to fund a list of capital improvement projects, including an aquatic and recreation center, public safety facility maintenance, road improvements, drainage, and event center upgrades. The council heard extensive public comment, deliberated, and ultimately approved the resolution 6‑1.
Public Comments & Testimony
Over twenty residents spoke. Positions were sharply divided:
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Supporters argued that the bond would transform Payson into a more family‑oriented community, provide year‑round recreational amenities for youth and seniors, attract professionals (e.g., doctors) and visitors, and that a similar investment (Green Valley Park) had become a community jewel. Several speakers noted that more than 50% of the sales tax revenue used to pay the debt would come from non‑residents. Supporters included BJ Bollier (volunteer of the year, former chair of several town commissions), Mike Foil, Anna Van Zile, Glori Surman, Mike Quinn, Brett Hallowba, Tom Dunning, Torry Austin, and Roy Sandoval (via Zoom).
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Opponents raised concerns about the town’s existing debt (including PSPRS), the use of an emergency clause to bypass voter referendum, the lack of detailed operating cost projections for the proposed facility, and the potential risk of default if the economy weakens. Opposition speakers included Ken Murphy (noting Payson’s high tax rates), Charlie Bell (quoting staff reports about volatile markets and the emergency clause), Shirley Dye (favoring rehabilitation of Taylor Pool instead), Jim Ferris (warning of recession and questioning the neutrality of bond consultants), Vick Conner (lack of cost‑of‑operations plan), Deborah Rose (arguing the emergency clause was improper for financial reasons), Ann Doyle (no public vote on the tax increase), Lance Marble (a member of the CIPCAC committee who advocated competitive bidding and prioritizing public safety), and several unnamed residents (objecting to the current council committing the town to debt before leaving office).
Council members also interjected with questions and clarifications during the public comment period. Town Manager Troy Smith, bond consultant Grant Hamill, Special Counsel Zach Sekas, and Town Attorney Jon Paladini responded to factual queries.
Discussion Items
The primary discussion revolved around Resolution 3409, which would authorize the sale of up to $70 million in excise‑tax‑backed bonds (the “Series 2024 Pledged Revenue Obligations”) to fund five select capital projects identified by the Capital Improvement Projects Citizen Advisory Committee (CIPCAC). Key points from the presentation and council deliberation:
- Financing structure: 25‑year amortization, annual debt service capped at $4.5 million, paid from the recently increased 1% transaction privilege tax (TPT) (now 3.88%). The bonds would have a first lien on excise taxes and state‑shared revenues, with a call date of July 1, 2034.
- Estimated proceeds: Under current market conditions (all‑in true interest cost ~4.25%), the $4.5 million annual debt service would generate approximately $70 million in net bond proceeds for projects. An additional $1.5 million per year from the tax increase would be reserved for operations and maintenance.
- Market timing: The consultants (Stifel) urged adoption of the resolution with an emergency clause to lock in favorable rates before an expected influx of competing bond issuances in September‑October and ahead of uncertainty related to the November 2024 Presidential election. Historical data showed rate spikes around previous elections.
- Emergency clause: Multiple speakers and council members debated its appropriateness. Town Attorney Paladini and Special Counsel Sekas explained that Arizona statute and case law allow emergency clauses for measures necessary to preserve the financial stability and general welfare of the town, and that such clauses are customary in almost all municipal bond resolutions.
- Alternative to building new vs. rehabilitating Taylor Pool: Council Member Mona, a registered engineer, detailed structural deficiencies at the 40‑year‑old Taylor Pool, concluding that rehabilitation would be more costly and less functional than building a new facility. Other council members echoed the need for an indoor, year‑round facility.
- CIPCAC recommendation: Lance Marble, a CIPCAC member, stated that the committee had recommended a competitive bid solicitation and had prioritized public safety over recreation. Town Manager Smith and bond counsel Hamill responded that professional services like bond underwriting are typically not put out to bid under state law, and that the council had selected Stifel based on experience.
Key Outcomes
- Motion: Council Member Scott Nossek moved to approve Resolution 3409, seconded by Vice Mayor Barbara Underwood.
- Vote: The motion carried 6‑1.
- Yes: Mayor Chris Higgins, Vice Mayor Barbara Underwood, Council Members Brett Flaherty, Joel Mona, Scott Nossek, and Jolynn Schinstock.
- No: Council Member Susan “Suzy” Tubbs (citing concerns about the use of the emergency clause and lack of voter referendum).
- Effect: The resolution authorizes the mayor, town manager, and deputy town manager to execute the necessary agreements and sell the bonds as soon as market conditions are favorable. The emergency clause allows the issuance to proceed without an automatic referendum.
The meeting adjourned at approximately 7:18 p.m.
Meeting Transcript
All right, welcome everyone to tonight's Pace In uh special council meeting. Like to call this evening's meeting to order. If everyone could please rise and uh remove your hats or uh Pledge of Allegiance, Councilmember Nassi, could you please meet us in the flesh? Thank you, sir. All right, Michelle, can we please get a roll call? Yes, let the record show that all council members are present, Council member children on right, great. Thank you. Uh, the purpose of tonight's meeting is consideration of a resolution number thirty-four oh nine. And as stated in last night's meeting, uh, there will be opportunity for for public comment. Anyone that would like to make a comment will have the opportunity to do so. Um, so with that form. And you don't have to fill out a form, yeah. You can just come on up. So, uh, Mr. Town Manager, uh, could you please proceed with resolution number thirty-four oh nine? Good evening, Mayor, Council, uh, members of the community that are present tonight. The council will consider resolution thirty-four oh nine, a funding resolution. In a few moments, you will be hearing from our bond consultants and bond council about the specific details of the authorizing resolution and bond sale. First, I would like to take the opportunity to provide some background information for the council and the community. A little over three years ago, the previous council identified several priority projects and areas for capital improvement during its initial strategic planning process. Following the closure of Taylor Pool, the council explored a partnership project with another entity to construct a community center that would have included an indoor swimming pool. Through the negotiation process, both entities recommended that the town of Payson take the lead to construct its own recreational pool facility project. The council used community input from a variety of sources, including the annual capital improvement community survey during its evaluation of these priorities. The council instructed staff to conduct a needs assessments, preliminary design work, and use other data gathering tools to learn more about the gaps and deficiencies that existed in the community. The conclusion of that work indicated serious gaps in ongoing maintenance funding, deteriorating facility and amenity conditions, absent amenities desired by the community, a lack of progress on the 2011 transportation plan, a historically underfunded pavement maintenance program, and a lacking stormwater infrastructure, among other critical infrastructure for the community. Using this information from the previous council and community input, this council adopted a similar set of goals and priorities. This council, however, expressed a strong sense of urgency to act, based in part on criticism from the community that projects have been studied but not acted upon. Government financial operations, including the financing of very large capital infrastructure projects constructed on behalf of an entire community, are uniquely different from the private sector or personal financing. Many communities have long used debt financing in the form of government-issued bonds to pay for these large expenditures. Said another way, annual municipal revenues in most cities and towns are insufficient to preserve existing infrastructure or build new infrastructure when needed. The council directed staff to explore the possibility of funding the community's priority projects using bond financing. The Capital Improvement Citizen Advisory Council was formed by the town council on February 22nd, 2023 to formally engage the community to assist the council in determining what projects citizens wanted to complete in what order and how to pay for them. The committee met 12 times and engaged with hundreds of residents to formulate a recommendation to the town council. On November 5th, 2023, the KIPCAT committee presented recommendations to the council to include, and their first recommendation was that the council must act with a sense of urgency to remove the.88 transaction privilege tax sunset provision to enact an increase of 1% to the transaction privilege tax for the town and to issue excise tax-backed bonds to fund five select projects. KIPCAC also recommended maintaining 1.5 million dollars in revenue from the 1% sales tax increase to pay for operations and maintenance. That will be important this evening as you look at the debt service payment that is in the recommendation. KIPCAC also recommended issuing general obligation bonds in 2025 to fund additional community infrastructure. On April 12th, 2023, Council passed ordinance 927, repealing propositions 401 and 402 from the town code. These sections were passed by the voters, however, under the laws and constitution of the state of Arizona, as interpreted by the Arizona Supreme Court. The propositions had no legal force or effect, and the council possessed no legal authority to enforce them. The existence of these invalid code sections had a negative effect on the town's ability to secure financing and had to be removed. In May of 2023, Transparent Payson and Jeffrey Hall sued the town for removal of these sections from the town code. On May the 1st, 2024, following a trial, the Honorable Michael Latham ruled in favor of the town of Payson, stating that the propositions 401 and 402 are unenforceable, invalid, and are of no legal effect. Town council was within their legal authority to repeal them. On December 13th, 2023, following the KIPCAC recommendations, council adopted ordinance 963, which amended the tax code and removed the sunset provision from the.88% TPT rate that was passed in 2017. The Sunset Provision did not fully fund the PSPRS financial plan when it was adopted due to the last minute edition of the Sunset Provision and the reduction in the recommendation at the time that that was a 1% tax increase. Additionally, the sunset provision was a limiting factor in the issuance of bonds. On February 6th, 2024, council adopted ordinance 964, amending the town tax code and increasing the TPT rate of the town of PESIN to 3.88% to generate additional revenue to pay for debt service associated with the issuance of excise tax back bonds. The next step in the process to realizing the community's goals to building community facilities and infrastructure is funding authorization. At council's direction, staff has been working with our bond council and bond advisors for about two years now to prepare you for your consideration of resolution 3409.
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