DALLAS -- Carmel, Ind., is preparing a $224 million sale that would mark the first issue of bonds by the city’s recently established bond bank.
The debt package combines in one sale what otherwise would have been a series of issues of general obligation bonds, redevelopment authority lease rental bonds, and special stormwater tax district bond issues.
The city plans to price the bonds on April 19. Stifel is the lead manager with City Securities serving as co-manager. Barnes & Thornburg LLP is bond counsel and Umbaugh is financial advisor.
Proceeds will help finance new projects such as the design and construction of roundabout and other road infrastructure projects, stormwater and drainage improvements, and local redevelopment improvements. A portion of the lease rental bonds will refund outstanding debt.
By streamlining several smaller issues into a larger bond issue the city hopes to secure a lower interest rate, according to an investor presentation.
It’s “more efficient and advantageous from a bond marketing perspective to issue one larger bond issue rather than issue a series of smaller bond issues over the course of several weeks or months,” said the bond bank’s executive director Christine Pauley, who serves as the city clerk treasurer. “This larger bond issue…would attract interest from a larger pool of investors, which translates into lower interest rates and bigger interest cost savings for the City.”
The present value savings are estimated at $2.5 million. “There will also be efficiencies and cost savings from issuing one bond issue instead of 17 separate bond issues in legal and financial fees,” she added.
The board voted to fill the executive director’s post with the clerk treasurer in order to save on salary costs and the Pauley’s office agreed to take on the additional responsibilities.
All of the bonds are secured by an ad valorem property tax levied on all taxable property within the city although some series are also backed by the city’s share of a county option income tax or debt service reserves. Stormwater fees and TIF revenues are not pledged revenues but will be tapped for repayment.
Standard & Poor’s rated the bonds AA-plus with a stable outlook.
Carmel, an affluent suburb of Indianapolis, set up the bond bank in January after the city council voted to turn it into a second class city. Indiana law permits each first and second class city in the state to establish a local public improvement bond bank that is governed by a five member board appointed by the Mayor. Carmel mayor Jim Brainard, who began his sixth four-year term in January, appointed the board in February.
The second class city designation also means that in the next election cycle Carmel will replace its elected clerk-treasurer position with a mayoral-appointed city financial advisor and an elected city clerk. The city will also increase the size of the city council to nine members from seven.
The bond bank serves as a “clearing house” for bonds issued by the city and its various taxing districts, including park, storm water and redevelopment districts. The bonds are purchased by the bond bank and the bank then issues its own bond to the public to fund the purchase.
S&P’s rating is based on the city’s economic strength. Carmel has benefitted from population growth of over 100% in the last decade. CNO Financial Group Inc., Monster.com, and Liberty Mutual Insurance are all headquartered in the city.
General fund operating results have been stable over the past three years. The city has available cash reserve of $11.6 million. The cash reserve includes $3.2 million in the general fund and $8.4 million that is outside the general fund but legally available for operations, according to S&P.
Property taxes, collected semiannually, are the largest single revenue source, accounting for 42% of total governmental fund revenues, followed by the income taxes at 38%.
