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Milwaukee County Readies Taxable GO Pension Notes

CHICAGO – Milwaukee County will price $140 million of taxable general obligation pension promissory notes Thursday to retire notes from a 2009 pension issue ahead of their bullet maturity at the end of the year.

The county decided to act sooner rather than later. “Rates are so low we wanted to take advantage of the current market” and avoid the risk that rates could rise, said the county’s capital finance manager, Pamela Bryant.

JPMorgan is the senior manager with RBC Capital Markets LLC serving as co-senior manager and Siebert Brandford Shank & Co. LLC as co-manager. Chapman and Cutler LLP is bond counsel with Emile Banks & Associates LLC serving as co-bond counsel. Public Financial Management Inc. and Peralta Garcia Solutions LLC are advisors to the county.

The notes coming due in December were included in the county’s $400 million pension obligation sale that sold in April 2009 to improve the funding ratios of the pension system.

The original debt was divided into two series, $265 million of 20-year general obligation promissory notes and $135 million of taxable pension note anticipation notes - subject to annual appropriation - with a December 2013 maturity. The county is limited to a 20 year maturity on its GOs so the anticipation notes were included to allow the county to amortize the bonds over a longer period. The new notes will have a maturity no further out than 2030.

Ahead of the sale, all three rating agencies affirmed the county’s credit marks assigned to $754 million of GO debt. Fitch Ratings assigns the county a AA-plus and stable outlook. Moody’s Investors Services rates the county Aa2 with a stable outlook and Standard & Poor’s rates the county AA and stable.

Fitch said the county benefits from conservative budgeting and consistently balanced operations with general fund balances in the range of 4% to 5%, and its reliance on diverse revenue streams. “Given the small financial cushion, the county’s ability to successfully achieve balanced operations will continue to be crucial to ratings stability,” Fitch wrote.

The county’s 2013 budget raises the property tax levy by a modest $3.9 million, appropriates $5.5 million of the general fund balance, and includes a $4 million budgeted contingency reserve, Fitch wrote. The county’s five-year capital improvement program to be financed with debt totals $108 million.

The credit is challenged by recent valuation declines and an elevated debt burden, Moody’s said. “The stable outlook is based on our expectation that while the county’s tax base will likely face challenges, particularly related to elevated unemployment and valuation declines, the diversity of industry employment and balance between the Milwaukee and suburban economies should somewhat lessen those pressures,” Moody’s wrote.

The county carries about $314 million of unfunded pension liabilities based on the most recent actuarial valuation.

The county is also working on several additional bond sales for the spring. It will competitively issue about $30 million of corporate purpose GOs. It would then issue about $60 million of new-money general airport revenue bonds in a negotiated sale, primarily to fund a baggage claim building.

The county owns and operates General Mitchell International Airport and Lawrence J. Timmerman Airport. It is accepting proposals from underwriters until Feb. 4 interested in working on airport financings, Bryant said.

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