Southwest Volume: Down 13% in 2013
February 24, 2014 12:11 PM
Despite rapid growth in many areas of the Southwest, bond issuance fell 13% in 2013 as interest rates halted the race to refund previously issued debt. New Mexico bucked the trend, however, with volume rising 40% to $1.55 billion. Rapidly growing cities such as Rio Rancho near Albuquerque faced the continuing struggle to find funds for transportation, water, power and schools. (Image: Bradly Salazar) See the full story: Nearly $1B Coming for Houston's Grand Parkway
At $2.9 billion, the bond deal for Texas' Grand Parkway Transportation Corporation ranked as the largest of 2013 and prevented bond volume from falling in the third quarter. Grand Parkway, designed to be a 184-mile loop around the Houston metro area, is a public-private partnership created by the Texas Department of Transportation. Ultimately, the project is expected to cost at least $6 billion. Despite the large deal, transportation bond issuance for the Southwest fell 5% to $10.29 billion. (Image: TxDOT)
While water supplies and maintenance were high-profile issues in the drought-stricken Southwest, bond issues for utilities fell 51% in 2013. Some issuers, such as the Tarrant Regional Water District, continued working on projects such as the Integrated Pipeline that is designed to draw water from East Texas to the Dallas-Fort Worth area. (Image: TRWD)
Dallas-Fort Worth International Airport was the second-largest debt issuer in the Southwest in 2013, and it's not done yet. Airport officials say they are discussing the need for a sixth terminal at the 40-year-old facility as they continue a $2.3 billion remodeling of their four original terminals. The SkyLink transit system that connects the terminals already loops the proposed site of the sixth terminal. DFW's largest tenant, American Airlines, emerged from bankruptcy under the protective wing of merger partner U.S. Airways. (Image: DFW)
Denver ranked third among Southwest issuers in 2013 with $887.8 million in debt. Most of the new money went for construction of the South Terminal at Denver International Airport, which will include a Westin Hotel and Conference Center and a depot for the Regional Transportation District's commuter rail line.RTD construction. A 60,000 square foot public plaza will connect the hotel to the main terminal of the airport. (Image: Gensler)
Among the eight states of the Southwest region, Utah recorded the largest drop in bond issuance, down 31% to $2.15 billion. The triple-A state, known for keeping bonds maturities to 10 years in most cases, continued to grow in 2013 and continues to expand highways, schools and mass transit. (Image: Padraic Ryan)
While Arizona's bond volume fell 3.1% in 2013, transportation debt soared 604% on a record $706 million Arizona Transportation Board deal in January. Arizona has seen its population growth slow after the recession hit the housing industry particularly hard. Despite the slowing growth, the cities in Phoenix's Valley of the Sun are continuing light rail and airport projects expected to promote business development. (Image: Alan Stark)
After five years of decline, bonds for housing experienced a sharp turnaround in 2013, rising 91% in the Southwest to about $1.5 billion. In addition to debt from state housing authorities, bonds for municipal utility districts appeared popular with investors seeking higher yields, experts said. Even in hard-pressed Arizona, the housing market continued a strong recovery.
With federal law changing, major healthcare operators consolidated in 2013. Deals such as Denver-based Catholic Health Initiatives' $2 billion acquisition of the St. Lukes Health System in Houston helped drive health-care debt up nearly 11% to $4.98 billion. In a complex, multi-state deal, CHI issued $1.2 billion of debt in 2013. (Image: Catholic Health Initiatives)
Arizona Public Service Co.'s closure of the Four Corners Power Plant in New Mexico symbolized the shift from coal power to cleaner burning natural gas, a fuel that is becoming increasingly affordable amid record production across much of the U.S. Despite growing demands for power, bond issuance for production of electricity fell 35% to $1.96 billion in 2013. (Image: APS)
The demand for new schools in Texas and other rapidly-growing regions of the Southwest nudged bond issuance for education up 1.8% to $20.65 billion in 2013. Education, which makes up the largest sector of annual bond issuance, remains hard-pressed for operating funds after lawmakers in Texas cut funding for the first time in history in 2011. A lawsuit challenging the state's funding measure is undergoing review in an Austin state district court. Other states face similar legal challenges. In Arizona, school districts are seeking more than $300 million that they say was wrongfully withheld by the state legislature. (Image: Frisco ISD)
Colleges and universities in the Southwest issued 12.3% less debt in 2013 than they did in 2012. Among the largest issuers was Texas A&M University, which priced $849 million of taxable and tax-exempt debt, including a $353 million deal to expand the Kyle Field football stadium. A&M was not alone in the stadium "arms race." More than $3.3 billion of stadium projects are on the boards, underway or recently completed. The Kyle Field expansion is expected to be ready for kickoff in 2015. (Image: Texas A&M)
