Durham, N.C., Ready to Offer $60M of Triple-A GOs Today

ATLANTA - Durham, N.C., is issuing almost $60 million of general obligation bonds today to fund its growing capital needs.

The deal will be sold competitively with Parker Poe Adams & Bernstein and the Banks Law Firm as co-bond counsel.

The deal, which has been rated triple-A by Fitch Ratings, Moody's Investors Service, and Standard & Poor's, includes two series. Stable outlooks are in place from each agency. Series 2008A totals $12.4 million and Series 2008B totals about $47 million.

Both series of bonds mature from 2010 through 2026. Officials described the deal as pretty much plain vanilla.

The bonds were approved by voters for public safety, cultural resources, and parks and recreation. The Series 2008A bonds are considered to be two-thirds bonds. North Carolina law allows governmental units to issue bonds each year in an amount equal to two-thirds of the principal amount of debt retired in the previous year.

Following the issuance of today's GOs, Durham has about $73 million of voter-authorized but unissued debt. It also has $34 million of outstanding water and sewer revenue bonds and $6.3 million of state revolving loans.

As far as more debt being issued over the next few years, the city's interim finance director, Keith Herrmann, noted that the City Council has authorized about $32 million of GO refunding bonds and a referendum seeking voter approval for more road and street bonds. Both the refunding bonds and the new debt, if approved, could come to market within the next two years.

"The city has tentative plans to issue about $50 million of revenue bonds in the spring of 2009 for its capital improvement program that totals about $266 million through fiscal years 2009-2014," he said.

And while final operating figures for fiscal 2007 are not yet available, city officials report that operations and profits were still in line with recent years, according to a report from the North Carolina Municipal Council, a division of the Carolinas Municipal Advisory Council Inc., a local organization that reports on governmental ratings. Durham's revenues were $241 million in fiscal 2005, $259 million in fiscal 2006, and $278 million in fiscal 2007.

According to a ratings report by Moody's analyst Alicia Stephens, the agency views the city's debt burden - which is at 3.3% of full valuation - as above average but still manageable, partly due to its average rate of debt retirement.

The city's treasury manager, John Allore, said that in addition to receiving the top ratings from Wall Street raters, it also received the top rating from the North Carolina Municipal Council

"It assigns ratings of zero through 100, and the city went to 91 from 90," he said.

Durham is located in the central piedmont section of the state, about 15 miles west of Raleigh. Although the city excludes the Research Triangle Park, it benefits from its businesses. The park includes about 140 companies and institutions employing approximately 40,000 people.

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