Arlington, Texas, home of professional sports stadiums, amusement parks and a General Motors assembly plant that were all shut down by the coronavirus pandemic, expects to take an $18.3 million hit to its revenues, prompting cutbacks in spending and possible layoffs.
The city detailed its response to the COVID-19 pandemic in a bond presentation for a five refunding deals worth about $46.8 million to be sold competitively this week.
Estrada Hinojosa & Co. is financial advisor on the deal. The Bonds are rated Aa1 by Moody’s Investors Service, AAA by S&P Global Ratings and Fitch Ratings.
Among the actions the city is considering taking is a suspension of general obligation bond projects, according to a roadshow for the bonds.
Other measures include delaying police and fire academies, a hiring freeze, suspending employee raises of 2%, and not buying any vehicles or other equipment.
Arlington depends on sales taxes for about 20% of its $500 million yearly budget. The city estimates that sales tax fell 20% in March, 70% in April and projects drops of 50% in May, 35% in June and 15% in July and August.
Last month, Arlington Mayor Jeff Williams and more than 100 other Texas mayors sent a letter to the state’s congressional delegation requesting more support for municipal budgets.
Arlington’s revenue generators such as the Six Flags Over Texas amusement park and the Texas Rangers baseball team have shut down.
“We are not having any tourism and we’re not having any shopping, and our university, the University of Texas at Arlington is shut down,” Williams told the Arlington City Council last month. “When you add all of those together, you’re looking at a pretty substantial shortfall being projected in our community.”
Under the CARES Act, only cities with populations of more than 500,000 receive direct funding. Arlington has a population of over 398,000, according to 2018 U.S. Census Bureau estimates.
“We simply do not understand the population cutoff in the CARES Act,” the letter said. “Simply put, there is no magic force that will protect local governments under 500,000 population from revenue losses during this crisis.”
Federal funding can only be used for coronavirus-related expenses and do not compensate for the millions of dollars in lost revenue.
After this week’s deal, Arlington will have $437.3 million of outstanding general obligation limited tax bonds.
“We do not see any material immediate credit risks for Arlington," Moody’s noted in a report when it affirmed the city's rating and stable outlook ahead of the deal. "However, the situation surrounding coronavirus is rapidly evolving and the longer-term impact will depend on both the severity and duration of the crisis.”
The city had planned to open its $1 billion new stadium for the Texas Rangers in March, but the Major League Baseball season was postponed indefinitely. The stadium is linked to a proposed convention center and Loew’s Hotel expansion to be funded by bonds.
Six Flags, the city’s major entertainment attraction, never opened this year, nor did the Hurricane Harbor water park. The National Football League, whose Dallas Cowboys play in Arlington at AT&T Stadium, announced its standard fall schedule this week, while promising "to make our decisions based on the latest medical and public health advice, in compliance with government regulations, and with appropriate safety protocols."
