LOS ANGELES - San Mateo County, Calif., through its Joint Powers Financing Authority, is planning to sell $210 million of lease revenue bonds to finance a new correctional facility the county seat of Redwood City.
The Bay Area county said it is targeting a pricing date in late April or early May.
Citi will be senior manager on the deal, with Raymond James as co-senior manager, and Barclays and Siebert Brandford Shank & Co., LLC as co-managers.
Orrick, Herrington & Sutcliffe LLP is bond counsel and California Financial Services is financial advisor.
Around $16.3 million of the proceeds will go toward retiring the notes used to reimburse the county for acquisition costs of the facility site, and around $165 million will go toward construction the new facility, said Jim Saco, budget director for the county.
The Maple Street Correctional Center will replace the current aging women's jail, reduce overcrowding in the men's facility, and provide additional capacity to house inmates under Assembly Bill 109, he said.
Gov. Jerry Brown signed AB 109 in 2011, after the U.S. Supreme Court ordered the state to reduce the population in the state prison system to 127.5% of design capacity, in part by moving some inmates to county jails.
The new facility, which will occupy a 4.8-acre parcel, will also allow for additional programming designed to reduce the rate of recidivism over time, Saco said.
Construction is expected to be completed by the end of November 2015, with the facility by March 2016.
"The debt structure levelizes the cost of ownership by accelerating the payment of the bonds at the same rate that the increased cost of operating the new facility — net of staffing and operating costs transferred from existing facilities — is expected to grow, thereby levelizing the added costs of owning and operating the new facility over the term of the bonds," Saco said.
The bonds will be limited obligations secured by base rental payments made by the county to the authority under a standard California facilities abatement lease.
Moody's Investors Service has assigned an Aa2 rating and stable outlook to the revenue bonds, and affirmed its Aaa rating of San Mateo County. The county's rating reflects its exceptionally large and stable tax base that is supported by a vibrant local economy, strong socioeconomic profile, and low county unemployment rate, Moody's said.
"The two notch rating distinction between Aa2 rating on the county's lease-backed obligations and its Aaa issuer rating represents the weaker security pledge for lease-backed obligations and reflects the additional risk to bondholders from the county's financial, operational, and economic conditions over the more secure general obligation pledge," analysts said.
The county has covenanted to include lease payments annually in its budget. Bondholders will benefit from the title insurance equal to the aggregate principal amount of the 2014 bonds, Moody's said.
Standard & Poor's has not yet assigned a rating to the new bonds.
