Bonds and Debt Service

Why debt?

The City issues debt in the form of bonds to finance long-term capital improvements such as streets, buildings, utility systems, etc. Because municipal bonds are typically tax-exempt, they usually carry a lower interest rate than other types of funding and are therefore an attractive source of financing. Bond funds are not used to fund ongoing operating costs. The City uses municipal bonds on projects that have at least the same useful life as the length of the bond repayment schedule. For example, if the City issues a twenty-year bond, the funded projects should have at least a twenty-year expected useful life (e.g., buildings, parks, utility plants, etc.). This allows the City to meet infrastructure needs while paying for the assets (via debt service payments on the bonds) as they are used.
For the complete City of Mesa Executive Budget Plan click here.

Types of Bonds

The City uses two main types of bond funding in the FY 2018/19 budget:
  • general obligation bonds make up about 30% of City projects.
  • utility systems revenue bonds fund most City projects.

Debt Service

Debt service requirements impact the City’s financial condition and can limit flexibility in responding to changing circumstances or priorities. When debt is issued, it obligates the City to make regular payments for periods of up to 25 years. The outstanding bond debt balance is paid back over time through annual principal and interest payments (debt service payments). The City’s goal is to have a consistent level of debt service obligations, creating a stable financial environment for providing consistent services.
See the complete debt dataset here.
Image Source: Getty Images
GO Bonds
General Obligation (GO) debt service payments are shown in the chart on the left.
Utility Systems Revenue Bonds
Debt service payments for utility revenue bonds are funded by rate charges paid by utility customers. Utility systems revenue bonds scheduled debt service payments by year can be seen in the chart to the right.

Debt Service Payments

NOTE: Although Community Facilities District (CFD) debt is tracked in the city's debt management system and therefore included in the dataset, CFD's are separate legal entities and CFD debt is not City of Mesa debt.