CHICAGO — Cincinnati is expected to enter the market Tuesday with about $80 million of unlimited-tax general obligation debt that is part of the city’s regular annual borrowing to finance capital projects.
The borrowing is a mix of refunding and new money and is divided into five series of bonds, two of which are federally taxable.
The bonds are secured by the city’s unlimited ad-valorem tax. Two of the series also feature additional municipal income tax pledges.
Proceeds from the refunding piece of the deal will be used to refinance bond anticipation notes.
The debt is rated AA-plus and Aa1 by Standard & Poor’s and Moody’s Investors Service.
Peck, Shaffer & Williams LLP is bond counsel. Stifel, Nicolaus & Co. is senior manager.
Citi and Loop Capital Markets LLC are also on the team. Public Financial Management Inc. is the city’s financial adviser.
All bonds carry Cincinnati’s full faith and credit pledge.
Series A is $34 million with a 2036 maturity.
Series B totals $6 million of bonds maturing in 2031 that feature an additional municipal income tax pledge. Series C and D, which total $7 million and $2 million respectively, are both federally taxable.
Series E totals $19.8 million of bonds with an as-yet-undetermined final maturity, according to preliminary bond documents.
Some $9 million of the proceeds will be used to finance construction of the Banks Project, a residential and retail riverfront development located downtown that is one of a handful of high-profile developments across Cincinnati.
Another roughly $11 million of proceeds from the economic development bonds will be used to finance a development called Washington Park, which is located in a tax increment district in the city’s downtown.
Like most cities in Ohio, Cincinnati relies on income-tax receipts for most of its general fund revenue. That revenue source is now beginning to show signs of recovery after several years of sharp declines due to the national and regional recession, according to credit analysts.
The revenue declines have pressured the city’s fiscal position but it remains anchored by several strengths, including a conservative debt structure.
All of its bonds are in fixed-rate mode. Nearly three-quarters of the city’s outstanding debt amortizes within 10 years.
Analysts also praise the city for its active management of its pension and other post-employment benefit liabilities.
The liabilities have been historically well-funded, though the funded ratios have declined since 2007.
After this week’s deal, Cincinnati will have $470 million of unlimited-tax GO debt and $80 million of economic development non-tax revenue bonds.