CHICAGO — Top-rated Columbus, Ohio, will price one of the larger deals on the market next week when it offers $447 million of general obligation bonds in a competitive sale set for Tuesday.
The borrowing marks the largest GO sale in the city’s history. It will raise money for a variety of projects and is part of the capital city’s regular annual capital plan issuance.
The finance team decided to move up the deal by a few months to take advantage of the current low interest rate environment, officials said.
“This is likely our own new issuance for the year,” said assistant city auditor Megan Kilgore. “We traditionally [go to market] in the fall or fourth quarter, but we’re anticipating rising interest rates, so we wanted to accelerate it with a reasonable amount of time into the month of July.”
Kilgore said she hopes the city’s “triple-triple” — triple-A ratings from all three rating agencies — will spark strong investor interest.
“There’s been a bit of a drought and I’m hoping we can capitalize on that,” she said.
“There’s been a tremendous amount of interest for this one,” Kilgore said. “I’ve been answering emails and the phone’s been ringing off the hook.”
About half of Columbus’ bond sales are typically done competitively. The city usually opts for negotiated sales if the deals are complex or refundings, according to Kilgore.
“This deal is straightforward traditional GO, made up strongly of utilities, and we felt we could go to market most effectively in a competitive sense,” she said
She added that she likes to see the pure “benchmark” return on a competitive deal.
Columbus is continuing to rebound from the recent recession but faces a few challenges, rating analysts said.
The current two-year Ohio state budget will mean less money for local governments due to the elimination of the estate tax and other provisions.
Columbus is projecting the loss of $19 million in state aid in 2013 and $12. 5 million this year, according to the city.
“The city will likely be challenged by upcoming reductions in state aid, and we expect that officials will successfully manage the revenue cuts to maintain strong reserve and liquidity levels,” Standard & Poor’s analyst Caroline West wrote in a rating report on the upcoming deal.
“Given the city’s strong reserve levels, our view of management’s strong financial practices, and the area’s deep and diverse economic base, we do not anticipate changing the rating during the two-year outlook horizon,” the report said.
Local officials have set aside $11 million from the current budget to help offset the loss, according to Kilgore.
The borrowing includes $405.6 million of unlimited-tax GO bonds, which feature a final maturity of 2033, and $41.4 million of limited-tax GO bonds, with a 2028 final maturity.
The bonds are voted GO debt and backed by property taxes, but the city expects to make most payments from utility revenues and income tax revenue set aside for debt service.
Bricker & Eckler LLP is bond counsel and Prism Municipal Advisors LLC is financial advisor.
After the sale, Columbus will have roughly $2.3 billion of GO debt. About 70% of the bonds amortize within the next 10 years.
