Investor Presentation August 2016 Disclaimer Certain statements - - PowerPoint PPT Presentation

City of Phoenix General Obligation Refunding Bonds Series 2016

Investor Presentation

August 2016

1

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

• f 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

• r implied by such forward‐looking statements. Neither the City of Phoenix nor any
• ther 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.

2

Presenters

$232,160,000* General Obligation Refunding Bonds, Series 2016

*Preliminary, subject to change.

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

3

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

• n 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.

4

Agenda

• Overview and Economic Information
• City of Phoenix Budget
• Phoenix Housing Market & Property Taxes
• Debt Profile and Plan of Finance
• Investor Relations & Contact Information

5

Overview and Economic Information

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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

• Greater Phoenix accounts for approximately 73% of Arizona’s

total employment

• Vibrant and strategically located economic center with a healthy

mix of employment that continues to expand

• Well developed and new infrastructure systems in place
• Median home prices low compared to similar major cities
• Greater Phoenix unemployment rate of 4.6%* continues to
• utperform the national rate

* as of January 2016 Largest Cities in U.S. City Population

New York 8,175,133 Los Angeles 3,792,621 Chicago 2,695,598 Houston 2,100,263 Philadelphia 1,526,006 Phoenix 1,447,128

Source: U.S. Census Bureau, 2010.

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Core Phoenix Economic Strengths

• Large, diverse employment base
• Achieved 10,000 new jobs through attraction and expansion

efforts in fiscal year 2015‐16

• Health Care, Education, Manufacturing, Financial, Retail,

Resorts, Governments and Schools

• Large Base of Employers/Corporate and Regional

Headquarters

• Established Higher Education Institutions
• All three State public universities have campuses in Phoenix;

plus community colleges and private universities

• Efficient Transportation Systems
• Air, rail, interstate and robust highway system
• Vibrant Downtown
• Convention & Hotel Destination
• Host of 2017 NCAA Final Four Fan Fest

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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
• The increase allows the City to maintain healthy reserves
• Pensions
• Fully funded annual required contribution (ARC) for all pension systems
• Significant pension reform for affordable and sustainable plans
• OPEB ARC fully funded since 2007
• Budget
• City Charter & State law require a balanced budget
• Transparent budgeting process; zero‐based budget

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City of Phoenix Budget

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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

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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
• ver the next three years

12

General Fund Financial Data

General Fund Activity

(Budgetary Basis)

(in thousands)

Actual FY 2014‐15 Estimated 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 Total Expenditures $1,051,395 $1,068,970 Ending Fund Balance $ 100,435 $ 101,446

Note: The adopted General Fund budget for fiscal year 2016‐17 expenditures is $1.1 billion.

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Phoenix Housing Market & Property Taxes

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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

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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

16

Debt Profile and Plan of Finance

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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

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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%

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Plan of Refunding

• Refund and restructure

approximately $276.1 million*

• Overall debt service is not increased
• Restructuring does not extend final

maturity of bonds being refunded

• Estimated Gross Savings of

$15.4 million*

*Preliminary, subject to change.

($ in millions)

Series Principal To Be Refunded* 2007A $ 259.1 2007B 17.0 Total $276.1

20

Preliminary Maturity Schedule

*Preliminary, subject to change.

Maturity (July 1) Series 2016 Principal* 2018 $ 7,040,000 2019 13,350,000 2023 9,700,000 2024 21,600,000 2025 30,530,000 2026 69,200,000 2027 80,740,000 Total $232,160,000

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Series 2016 Refunding Timeline

POS Distribution August 12 Pricing of Bonds August 23 Closing September 13

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Investor Relations & Contact Information Investor Relations & Contact Information

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Investor Relations Website

https://www.phoenix.gov/finance/investor

Questions Regarding the City of Phoenix:

(602) 262‐7166 Denise Olson, Chief Financial Officer denise.olson@phoenix.gov Kathleen Gitkin, City Treasurer kathleen.gitkin@phoenix.gov Scot Obal, Investment & Debt Manager scot.obal@phoenix.gov

Questions Regarding the Series 2016 Bonds:

Piper Jaffray Peter Phillippi, Managing Director peter.j.phillippi@pjc.com (602) 808‐5427

City of Phoenix General Obligation Refunding Bonds, Series 2016