BRADENTON, Fla. – Issuers across the Southeast brought $71.7 billion of municipal bonds to market in 2016, a 3.3% year-over-year increase that was generated largely by refundings, according to data from Thomson Reuters.
The Southeast's near-flat year-over-year growth stood in stark comparison to the region's 39.4% upswing in issuance in 2015, which led the nation.
Refundings and combined new money deals totaled $45.5 billion in 2016, up almost 5% from 2015, compared to $26.2 billion of new money issuance, an increase of only 0.5%.
Issuance of refunding bonds is expected to decrease in 2017 given expectations that rates will go up, Gurtin Fixed Income Management analysts said in January.
State-level issuers in four of the Southeast's 11 states – Louisiana, Mississippi, Virginia and West Virginia - face budget gaps this year amid growing uncertainty at all levels of government about the future of federal funding, especially for health care.
Some issuers will need to be resourceful to finance infrastructure in 2017, according to David Moore, managing director of the southern region financial advisory practice at Public Financial Management Inc.
"While rising interest rates will slow refundings, we see growing new money needs across most sectors," he said. "It will take ingenuity and creativity to fit the new money financings into local government budgets that are constrained by competing interests for every dollar of new revenue created as the economy continues to strengthen."
Moore said his firm will focus on helping clients develop plans that can adapt as funding policies change.
"Putting aside concerns over elimination of tax-exemption, most of the infrastructure funding concepts would be positive for local governments that have material needs but limited resources," he said. "PFM is helping clients craft strategies to move forward with projects so they are 'shovel ready.'"
PFM maintains a wide range of clients to sustain its business model, Moore said.
It's an approach that put the firm atop Thomson Reuters' league table for financial advisors in the Southeast, credited with 160 deals and $13.25 million of volume, representing 24% of the $55 billion in volume credited to advisory firms.
Public Resources Advisory Group ranked second with $4.35 billion over 46 issues, while Davenport & Co. was third with $3.6 billion advising on 64 deals.
Among senior managers, Bank of America Merrill Lynch led the table, credited with $12.5 billion in 124 deals, followed by Citi with $8.7 billion in 102 deals, and Wells Fargo with $7.54 billion in 110 deals.
McGuireWoods was the top bond counsel firm, credited with $3.45 billion in 42 deals, while Nabors Giblin & Nickerson was second with $3.23 billion in 62 deals and Greenberg Traurig was third with $3.22 billion in 75 deals.
Florida top source of municipal issuance in the Southeast, with $18.64 billion of bonds, though that was a 10.6% drop from the prior year.
Miami-Dade County was the region's second-largest bond issuer, selling $1.96 billion in eight offerings.
Issuers in Virginia increased their annual volume 21.8% to $8.68 billion.
The Virginia College Building Authority was the state's largest issuer, selling $681.6 million over three deals.
Georgia dropped to third among the region's bond-issuing states from its usual place behind Florida, with $7.68 billion, down 1.2%.
The Georgia state government was the region's largest issuer, selling $2.26 billion of debt including the largest Southeast deal of 2016, a $1.37 billion general obligation deal June 7.
North Carolina issuers ramped up sales by 16% to $7.57 billion.
The University of North Carolina was the region's ninth-biggest bond issuers with $753.5 million in eight deals last year.
Alabama issuance spiked 72.3% to $6.26 billion.
The Alabama Economic Settlement Authority became the top issuer for the state on Dec. 1 when it securitized $628.7 million of bonds backed by settlement payments stemming from the Deepwater Horizon oil spill in the Gulf of Mexico.
In Kentucky, issuers brought $6 billion of bonds to market for a 37.6% increase.
The volume of South Carolina deals rose 2.4% to $5.9 billion.
Tennessee bond volume dropped to $5.05 billion, down 1.7%.
In Louisiana, volume was $3.3 billion, a decline of 29.9%.
In Mississippi, bond issuance dropped by 35% to $1.63 billion.
West Virginia issuers brought $917.3 million to market, a drop of 3.3%.
The largest category of Southeast bond issuance in 2016 was debt for general purposes, a category that outperformed education for the first time in many years, with $19.4 billion of sales for a 33% increase.
Education came in second with $15.9 billion, a drop of 16.7% from the prior year.
The region saw a dramatic 79% increase in financing healthcare needs with $10.7 billion of par volume – a move that followed a similar trend around the country.
Tax-exempt issuance rose by 4% to $63.5 billion, while taxable deals increased by 33% to $7 billion.
Deals subject to the alternative minimum tax dropped off by 62% to $1.17 billion.
Issuers sold $45.1 billion of municipal bonds through negotiation, a 1.2% increase, while they stepped up competitive offerings increasing their use by 11% to $21.4 billion.
Private placements were off 7% to $5.2 billion.
Some $52.8 billion of debt defined by Thomson Reuters as revenue bonds were issued, up 2.1%, while deals defined as general obligation bonds also rose 6.7% to $18.9 billion.
Fixed-rate bonds issuance was up 3.5% to $68.24 billion, while variable-rate short put debt went up 19.7% to $1.86 billion and variable-rate long/no put issuance rose 243.3% to $786.4 million.
The use of linked-rate bonds plummeted 60.5% to $648.9 million, while the use of zero-coupon bonds rose to $130.7 million from $21.9 million.
The use of all forms of credit support declined last year.
Bonds wrapped with bond insurance were down 16% to $3.02 billion; guaranties were off 8.5% to $2.78 billion; letters of credit lagged 73% to $91 million; and insured mortgages dropped 80% to $12 million.
There were no standby-bond purchase agreements last year, compared with $115 million in 2015.
State agencies issued the most debt with $18.68 billion, a drop of 3.6%, while local authorities stepped up borrowing by 5.4% to $14.75 billion.
Special districts saw deals rise by 24% to $11.1 billion, while cities and towns boosted issuance by 6.6% to $10.68 billion.
Counties and parishes saw a drop of 5.3% to $8.9 billion, while state governments deals slumped by 5.3% to $4.9 billion.
Colleges and universities increased sales by 11.7% to $2.52 billion.
Bank-qualified bonds increased 8.3% to $2.3 billion.
