1. The MD&A reports that the city's general obligation bonds were rated AA-by Standard & Poor's. What is the significance of an AA-rating? (Standard & Poor's ratings are similar to those of Moody's.)
2. Another city of approximately the same size received the same bond rating as Tucson, even though its overall financial condition by all reasonable measures was substantially weaker than that of Tucson. What would be the most likely explanation of why the city received a higher relative rating than Tucson, even though Tucson is more financially sound?
3. A note to the financial statements indicates that the total required general obligation debt service payments over the life of the GO bonds were $266 million. Yet the total reported liability for GO bonds was less than $215 million. What is the most likely explanation for the difference? How can you justify reporting the lower amount, when it is the higher amount that will have to be paid?
4. The city's list of bonds payable (Note 9) indicates that GO bonds were issued in 2000 with an interest rate of 5.75 percent. GO bonds issued in 2014 carried interest rates between 3 and 5 percent. Why do you suppose the city does not refund (redeem) the 2000 bonds and replace them with lower-interest obligations?
5. The Arizona Constitution limits the amount of debt that a city can have outstanding to 20 percent of the assessed value of its property if the debt is for water, sewer, parks, open space, and recreational facilities. The assessed valuation of property in Tucson in 2014 was $3,151,042,287 (Table XIII). What was the amount of the city's legal debt margin? How much of the city's debt limit is exhausted?
6. In 2011 the assessed value of the property in Tucson was $3,914,105,239, and the city had $222,360,610 in GO debt (and no balances in debt service funds). By 2014 the assessed value of property had decreased to $3,151,042,287, but bonded debt had also declined to $214,760,000. Taking into account the amount in the debt service funds, would you say that, other factors being equal, the city's debt burden was greater or less in 2014 than it was in 2011? Explain, making relevant computations.