Arizona rural and tribal infrastructure bond program relaunched

Arizona reactivated a bond program to help rural communities and tribal governments finance infrastructure projects.

The Greater Arizona Development Authority (GADA), which had been dormant for nearly 10 years, began offering financial assistance this month, Gov. Katie Hobbs announced this week.

"By reinvigorating this tool, we are providing an opportunity to leverage existing funds to invest in essential infrastructure all across Arizona," she said in a statement. "This will support our focus on priority projects, such as transportation, clean energy, water supply, and workforce training facilities."

Over the next year, financings could total $50 million to $100 million, according to Robin Romano, board president of the Arizona Finance Authority, which oversees GADA.

"The revival of the GADA is a top priority," she said in the statement.

The bonds are repaid with dedicated project revenues or future local tax revenue. The relaunched authority, which set an Oct. 1 application deadline, said it can provide lower interest rates for borrowers due to its "strong" bond ratings and can cover up to 50% of closing costs.

In May 2023, S&P Global Ratings upgraded the infrastructure revenue bond program to AA-plus with a stable outlook from AA to reflect the priority-lien rating for the town of Queen Creek, which is the program's lowest-rated participant. S&P also cited a nearly $12 million collateral reserve fund that could support all loan repayment obligations through maturity.

The debt was rated A1 with a stable outlook by Moody's Ratings in its last report, which was in 2014.

Between 1997 and 2014, GADA helped fund 84 projects through the issuance of $574 million of bonds for projects, including firehouses, community centers, libraries, municipal complexes, and transportation improvements in dozens of rural communities, according to the statement from the governor's office.

The authority had $6 million of conduit bonds outstanding for six governmental entities as of June 30, 2023, its latest audited financial statement showed. The debt, which is largely due to mature by 2033, was from deals issued in 2007, 2008, 2009, 2010, and a nearly $10.4 million bond refunding in 2014.

Mary Foote, GADA's new director, expects pent-up financing demand.

"As we meet with local elected officials and leadership from rural cities and counties, we are learning about their financing needs for public infrastructure projects and believe there is a great demand for GADA technical assistance and financing," she said in the statement.