The town council in Payson, Arizona, rescinded its Aug. 21 approval of $70 million of tax-exempt bonds within the wake of ongoing litigation and opposition to the debt sale from incoming council members.
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An Arizona town terminated a plan to sell $70 million of bonds despite prevailing in a lawsuit that claimed the debt’s approval violated the state structure.
The Payson Town Council voted Oct. 23 to rescind its Aug. 21 approval of the tax-exempt, fixed-rate pledged revenue obligations within the wake of ongoing litigation, including an appeal of the Oct. 2 Gila County Superior Court ruling, in addition to opposition to the bond sale from incoming council members.
Those aspects made the bonds too dangerous to sell, Town Manager Troy Smith told the council.
The conservative Goldwater Institute, which filed the lawsuit in September and a subsequent notice of appeal of the court ruling on behalf of a Payson resident, hailed the town’s decision to not sell the bonds.
“The court battle against governments’ abuse of emergency clauses is not over — indeed, local governments throughout the state routinely bypass democratic accountability using ’emergency’ clauses,” the institute said in a press release on Wednesday. “We’re fighting back to make sure government cannot steamroll its own residents and deny them rights afforded under Arizona’s structure.”
The grievance contended Payton officials denied residents a possibility to arrange a referendum on the debt issue by fast-tracking its issuance “under the pretext of an emergency” in violation of the Arizona Structure.
It argued the council aimed to bypass the structure’s right of referendum through the use of a narrow exemption allowing municipalities to enact emergency measures when such actions are “vital for the immediate preservation of the peace, health or safety of the town or town.”
The court found the lawsuit was moot and the council’s 6-1 vote approving the bonds met a supermajority requirement in state law for invoking the emergency clause, in response to a town council document.
The town had several explanations for authorizing the emergency clause, including the 2019 closure of a pool that limited the flexibility to show children methods to swim and avoid drowning and for others to take part in health-promoting aquatic activities. Along with an aquatic and recreation center, the bonds would have funded various capital improvements for Payson’s 16,680 residents.
The choice to drop the bond issue was also driven by opposition to its sale by the mayor-elect and two council members who take office in December, in response to a press release from the town.
The bonds, which were rated AA-minus with a stable outlook by S&P Global Rankings, were backed by a first-lien pledge on Payson’s excise tax and state-shared revenue and structured with serial maturities between 2025 and 2049, in response to a draft preliminary official statement submitted on the Aug. 21 council meeting.
Payson had planned to sell the bonds through Stifel, Nicolaus & Co. in September.