Pinal County hears refinancing options to cut borrowing and pension costs

Pinal County supervisors heard detailed proposals from financial advisers on refinancing existing county bonds and on using the Arizona State Retirement System (ASRS) contribution prefunding program to reduce the county’s pension-related costs.

At a work session, Angie Woods, director of the Office of Budget and Finance, introduced advisers from Stifel who reviewed two distinct categories of financing: refunding outstanding debt and potential long‑term financing for new projects. "We broke it up into 2 different categories, intentionally, because today's category has more to do with, the value of refinancing, outstanding obligations," Woods said.

The refunding proposal covered bond issues from 2014 and 2015. Mark Patel of Stifel said the county’s 2014 transaction totaled $52,700,000 (used for Hunt Highway expansion, public safety radio upgrades, Ironwood Drive improvements and court system work) and that the average coupon on that issuance was about 4.5 percent. Stifel identified roughly $60 million in 2014–2015 bonds as candidates to be refinanced and outlined a conservative scenario that would lower the county’s borrowing cost into the low‑3 percent range. "We think the county could save about $3,000,000, this is budget savings, of about 300,000 a year," Patel said, describing a level‑debt structure that does not extend maturities. He said the remaining callable principal on the identified issues would be paid off around 2035 and that any timing to enter the market would be driven by interest‑rate movements.

Omar Dagestani of Stifel’s Chicago office led the presentation on the ASRS Contribution Prefunding Program (CPP). He said Pinal County’s portion of the ASRS unfunded liability is "just north of $106,000,000" and that the system currently charges approximately 7 percent in arrears. Dagestani described a CPP approach in which the county prepays a lump sum to ASRS to produce offset credits and reduce future contribution costs. "We borrow for the $106,000,000 dollars and we achieve savings, on a present on a cash flow basis of $54,000,000 on a present value basis of 13.2% or 12.4%," Dagestani said, identifying that estimate as conservative.

Stifel presented sensitivity scenarios to show how market and ASRS investment performance would affect savings. Under a lower‑earnings scenario the advisers said present‑value savings could fall to roughly $7.64 million (about 7.2 percent), while a stronger earnings outcome would increase savings (adviser estimates in the meeting included a higher‑earnings scenario with present‑value savings in the upper‑teens millions). Dagestani noted the CPP structure is flexible and — if the board adopted it and later required funds for an emergency — the county could access a portion of the prefunded amounts with approximately 30 days’ notice.

Board members pressed on timing and risk. Stifel said they expect to monitor markets and would only go to market when staff and the board authorize and the numbers meet the county’s objectives. "We would only do a financing for you if you give us the green light to go, if we can only meet our objectives with financing," Patel said. The advisers outlined a tentative public schedule (staff follow‑up and further work sessions, a public hearing and a potential authorizing resolution), noting any sale would depend on market conditions.

No formal motion or vote occurred during the session; the presentation was for consideration and direction only. County staff and Stifel will return with refined numbers and a proposed calendar if the board chooses to pursue either or both options.

Ending: Supervisors thanked the presenters and had no immediate objections to further study; the board did not take action at the work session and asked staff to continue evaluating timing and structure for both a refunding and an ASRS CPP prefunding option.