Atlanta OKs Plan for Tackling Budget

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BRADENTON, Fla. — The Atlanta City Council on Monday formally adopted a five-year budget stabilization planning process to eliminate deficits in certain funds, examine options to reduce unfunded pension benefits, and fix aging infrastructure with planned long-term bond issues.

The council, after lengthy discussion, also approved three syndicates to sell up to $800 million of revenue bonds for Hartsfield-Jackson International Airport.

The budget planning process was originally presented last October and shortly before the end of former Mayor Shirley ­Franklin’s term. It also will identify funding for city employees’ cost of living increases, replace expiring grants used to hire more police, and reestablish a reserve fund of at least $100 million.

One reason for developing the planning process, which will be updated annually, was the downgrade of the city’s general obligation rating last year to A1 from Aa3 by Moody’s Investors Service and to A from AA-minus by Standard & Poor’s. Moody’s also assigned a negative outlook to the city’s credit. The city’s GOs are not covered by Fitch Ratings.

Mayor Kasim Reed, who took office in early January, will present the plan in October.

The plan is part of a broader, ongoing performance management process based on practices recommended by the Government Finance Officers Association, according to its sponsor, council member Felicia Moore.

“This is a working document that will serve as a blueprint for creating future budgets,” Moore said.

The City Council also approved a report called “State of the City’s Infrastructure,” which details a current backlog of needs estimated at $750 million and improvements over the next 25 years estimated to cost $3.1 billion. The report did not include water and sewer or airport improvements since those are undertaken in separate enterprise funds.

Atlanta also is studying options to reduce rising costs for retirement benefits that are currently 20% of the city’s $523 million annual operating budget. In addition, the city has an unfunded pension liability of $1.5 billion and an unfunded liability for other post-employment benefits of $1.1 billion, which were cited by analysts last year.

Much of the proceeds from the $800 million of new-money and refunding revenue bonds for Hartsfield-Jackson International Airport will be used to complete a new international terminal.

The deal was delayed last year after questions were raised about the whether the initial syndicate included enough minority participation.

The city then issued a request for proposals from underwriters, and a selection committee composed of top-level department heads voted to recommend the syndicates to the council. The airport’s financial adviser, First Southwest Co., consulted but did not vote on the selection, city staff told the council Monday.

JPMorgan will be the book-runner for the new-money portion of the transaction, which includes Jackson Securities as co-senior manager and co-managers Bank of America Merrill Lynch, Grigsby & Associates, Jeffries & Co., M.R. Beal & Co., Ramirez & Co., and Wells Fargo Securities.

Citi will be the book-runner for an interest rate conversion of Series 2003 bonds that is also part of the deal. Loop Capital Markets LLC will be co-senior manager while co-managers are Barclays Capital, Blaylock Robert Van LLC, Cabrera Capital Markets LLC, Rice Financial Products Co., and SunTrust Robinson Humphrey Inc.

Siebert Brandford Shank & Co will be the book-runner on the refunding with Goldman, Sachs & Co as co-senior manager and co-managers Estrada Hinojosa & Co., Morgan Keegan & Co., Morgan Stanley, Raymond James & Associates Inc., Terminus Securities LLC, and Sterne, Agee & Leach Inc.

The city now will proceed with validating the bonds, meeting with rating agencies, and preparing bond documents in consultation with underwriters. A sale date was not given.

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