CHICAGO — Milwaukee will enter the market Wednesday with a new comptroller at the helm, with a mix of about $225 million of new-money and refunding bonds and cash-flow borrowing.
While the city’s financial operations have stabilized after several difficult years, the challenges of dealing with declines in state aid and its tax base value drove Moody’s Investors Service to downgrade the city’s general obligation rating one notch to Aa2 with a stable outlook. That brought the rating in line with its AA Standard & Poor’s rating, which was affirmed last week.
The city has $750 million of outstanding GO debt.
“Some of the economic numbers have stabilized and are on an upswing so we feel we are on the right path, but we understand Moody’s action when they look at some of the numbers,” said deputy comptroller Michael Daun. “We may not be on a fast path to improvement, but we are on a steady path.”
The city will take competitive bids on $109 million of new-money and refunding GO promissory notes, $3.5 million of taxable GO bonds, $6 million of taxable GO promissory notes, $8.5 million of GO corporate purpose bonds, and $100 million of cash-flow notes.
The notes received top short-term ratings.
Robert W. Baird & Co. is financial adviser and Katten Muchin Rosenman LLP is bond counsel.
Milwaukee expects in the coming weeks to also tap about $50 million in an extendible municipal commercial paper program of up to $200 million.
It marks the city’s first use of such paper, which allows it to forgo credit support because the maturity is automatically extended in the event of a failed remarketing.
Bank of America Merrill Lynch will be the dealer on the first tranche.
Morgan Stanley and Loop Capital Markets LLC also were chosen by the city to manage the program’s issuance.
As part of Milwaukee’s shift away from floating-rate products that require letters of credit, it will also begin using SIFMA index bonds and rolling tender variable-rate bonds, though the comptroller’s office will maintain a bank relationship as a backup.
A small issue of both is expected next month, with Bank of America Merrill as the dealer on the SIFMA bonds and Morgan Stanley as the dealer on the rolling tender securities.
“It’s ultimately about raising capital at the lowest cost,” Daun said.
On Tuesday, Martin Matson, deputy director of the city’s Employees Retirement System, took office as Milwaukee comptroller.
Matson was facing Milwaukee County supervisor Johnny Thomas Jr. in the early April race until Thomas suspended his campaign following the filing of criminal charges against him for accepting a bribe during a sting operation.
The office was up for grabs following the decision of longtime Comptroller W. Martin “Wally” Morics to retire.
The comptroller sits on the city employees’ pension board; manages Milwaukee’s financial affairs, including debt management; establishes accounting policies for city departments; and manages cash flow, audits and the financial analysis of projects.
The comptroller also sits on several boards and is secretary to the city’s public debt commission.
The city struggled early in the recession to balance its budgets amid dwindling state aid and it experienced three consecutive years of decline tax base values.
Milwaukee’s general fund reserves were weakened after significant draws in 2008.
The city also faces limited flexibility in raising revenues.
Milwaukee’s strengths include its sizeable tax base and position as the economic engine for the region, with rapid debt repayment and a fully funded pension system. Its debt profile benefits from the support of a public debt amortization fund.
“The stable outlook reflects the stabilization of the city’s financial profile in the wake of reductions in state aid and expectation that the local economy will stabilize in the medium term,” Moody’s wrote.
