LOS ANGELES — The San Diego Association of Governments plans a bond sale in mid-July.
Its board on Friday will discuss its strategy for issuing $350 million in sales tax revenue bonds to support fast-tracked projects.
SANDAG has a $3.6 billion plan that extends to 2050 outlining regional road, rail and bus route improvements while giving cities control of billions of dollars to spend on local transit projects.
Projects that would be funded through the bond sale were identified in July 2015 through the
SANDAG has exhausted the proceeds from a $350 million bond sale in 2014 and may be drawing on its commercial paper to finance project costs until the proceeds from the 2016 financing are received, according to an April 8 report from financial advisor Public Financial Management.
As such, PFM said, part of the proceeds from the bond sale would be used to take out a portion of the outstanding commercial paper.
The debt is backed with a half-cent sales tax that voters approved in 1988 and then extended for 40 years in 2004 to pay for the regional transportation projects.
The finance team for the bonds has already been selected. Citi is bookrunner. Orrick Herrington & Sutcliffe is bond counsel. Norton Rose Fulbright is disclosure counsel.
The financial team hopes to price the tax-exempt, long-term, fixed-rate bonds in mid-July "amid what is anticipated to be a continued low interest rate environment," according to the PFM report.
PFM notes in the report that the current 30-year AAA Municipal Market Data Index yield is 2.68%, 1.21% below its ten-year average.
If current market conditions hold, the report said, the bonds could price with true interest costs of 3.7%. Annual debt service would increase from $84 million to $103 million at that pricing point. Fiscal 2015 sales tax revenue was $269 million, resulting in estimated annual debt service coverage of 2.6 times.
Given its strong debt service coverage, PFM's report said it hopes that SANDAG will attain Triple-A ratings from Standard & Poor's and Fitch Ratings as it did for the 2014 bond sale. Moody's Investors Service gave SANDAG an Aa2 rating.
"In light of the existing ratings, the financing teams believes SANDAG should approach only S&P and Fitch for ratings on the 2016 bonds, as it did for the 2014 bonds," the PFM report states.
The team hopes to present financial documents including the preliminary official statement to the board at its May 27 meeting.
SANDAG, a regional planning group, has representatives from 19 municipal governments on its governing board.
On Friday, it will discuss the results of a voter survey on a ballot measure that would bring $18 billion over 40 years.
