CHICAGO — The Indiana Bond Bank Thursday plans to price $300 million of notes as part of its annual financing to help cover anticipated cash-flow shortfalls for local governments and school districts across the state.
This year’s issuance is smaller than usual as local governments finally begin to catch up with state-mandated property tax reassessments and as school districts find themselves in less need of cash-flow loans after the state took over their general funds.
The smaller note issue means a smaller financing team, and the Bond Bank has dropped down to two co-managers from the three or four it used in previous issues, according to director Dan Huge.
JPMorgan will senior manage the transaction with City Securities Corp. and Morgan Keegan & Co. . acting as co-managers. Barnes & Thornburg LLP is bond counsel.
The notes mature Jan. 6, 2011, and officials expect to benefit from the market’s current low interest rates for one-year maturities. “Also this is a time when a lot of the major [money market] funds are flush with cash and looking for good one-year investments,” Huge said.
Proceeds from the issue will be used to offer low-cost loans to local units of government — most of which are school districts — that will use the money to cover payments while waiting for property tax revenue to come in.
After years of delays in sending out property tax bills, most Indiana counties are now sending out the bills on time, which means they’re able to distribute the revenue to local governments on time. The delays came after the state ordered widespread reassessments starting in 2003.
The smaller size of this year’s issue also comes after the state agreed to take over funding school districts’ general funds. The move was tied to Indiana’s new property tax law, which caps property tax bills and has led to steep declines in tax revenue for local governments and school districts.
In anticipation of the decline, the state agreed to take over funding for local schools’ general funds.
“While the borrowing size is down, the number of entities participating is about the same as last year,” Huge said. “That’s another proof that we’re seeing borrowing sizes being reduced because of property tax bills going out on time in 2010.”
Also this week, the Michigan Municipal Bond Authority is expected to price roughly $28.2 million of state aid revenue notes for local school districts in the state. The notes will mature Aug. 23, 2010.
Siebert Brandford Shank & Co. and Morgan Stanley are underwriters. Miller, Canfield, Paddock and Stone PLC and East Lansing-based Thrun Law Firm PC are co-note counsel on the deal.
