DALLAS — The West Texas city of Lubbock will price a $131 million general obligation bond refunding and $99.3 million of certificates of obligation for its water and sewer program.
The bonds and certificates are expected to price April 1 through negotiation with book runner Wells Fargo Securities, with Citi, Raymond James, Hutchinson, Shockey, Erley & Co. as co-managers. RBC Capital Markets is the city's financial advisor.
The upcoming issue carries ratings of AA-plus from Standard & Poor's and Fitch Ratings with stable outlooks.
The city expects savings of at least 5% on the refunding portion. Proceeds from the certificates will be used for water and sewer projects.
The city has about $982 million of outstanding parity debt, according to Fitch.
"The overall debt burden is high relative to market value. The city maintains a large, comprehensive capital improvement program, much of which is planned to be funded from city enterprise systems," wrote Fitch analyst Rebecca C. Moses. "The city's largest pension program is well-funded in contrast to a separate, firefighters' pension program with a lower funded position. Carrying costs are currently manageable."
The city's capital improvement program for 2015 totals $213 million and is largely driven by various wastewater and electric utility projects. The city's rolling five-year CIP, including the electric utility, for fiscal years 2016 through 2020 totals $702 million.
"Fitch has some concern over the size of the city's capital program, although recognizes some flexibility exists in its implementation over future years," Moses wrote. "Most projects are planned to be debt financed with self-supported debt."
The Lubbock City Council adopted rate increases to support the new projects in the budget for the current fiscal year.
Lubbock's economy is bolstered by agriculture and Texas Tech University with an enrollment of about 30,000 students. Tech also has a medical school, which is seen as positive factor in the city of 241,322.
"City officials report that construction activity continues to grow significantly and that there are no concerns with any of the city's primary taxpayers or employers," S&P analyst Lauren Spalten wrote. The county unemployment rate was 5% in 2013.
