Columbus deal designed to offer retail buyers a leg up

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Columbus, Ohio, is offering a more retail-friendly structure with its $400 million high-grade general obligation issue slated for early next month.

The city expects to leverage what it considers a special electoral relationship with voters through its newly-established "Invest in US" program, said City Auditor Megan Kilgore.

Of the last 96 bond referendum authorizations on the ballot, 90 have passed. Recent ones have passed at a 70% margin. The last time a referendum failed was in 1981.

“People in Columbus care so much about their city,” said Kilgore, a former deputy in the office who left the office to join a financial advisory firm and then won election to the office last fall following the retirement of long-time Auditor Hugh Dorrian. "So the idea behind this was how do we lower the barrier both from an economic perspective and then also try and create a list of selling group members so that the majority of our citizens who do have brokerage accounts will be able to pick up the phone or go online and easily buy the city’s bonds.”

The city has cut the lowest denominations for purchase to $1,000 from the usual $5,000 to extend the opportunity to residents and corporate citizens and is directly marketing the bonds to city residents as a way to support resurfacing roads, replacing aging water mains and building a new Linden Community Recreation Center as proceeds are earmarked for infrastructure across the city.

Kilgore said that the $1000 entry level makes the bond more accessible to investors but won’t increase costs for the city. “At that level you’ll still have a great investment and you’ll have ownership,” she said.

The city went live with the program last week and Kilgore said there has been good interest for the program since launch with citizens are asking to buy specific projects. “At a minimum we are going to have above average retail participation but we are hoping for around 10% of the deal,” she said.

The city will hold a retail order period on Oct. 2 and the institutional pricing is set for Oct. 3. Bank of America is senior manager and Goldman Sachs is co senior manager.

To facilitate the transactions, Kilgore's office canvassed Columbus-area brokerages to find those serving the majority of local retail accounts. The brokerages also have to be dealers that can execute a bond transaction. Anyone with an account with one of the listed firms can buy on the day of the sale.

The deal offers $359 million of unlimited tax, tax-exempt GOs; $15.1 million of limited tax, tax-exempt GOs; $25 million ULTGO that are taxable, and $20.1 million of various purpose LTGOs that are also taxable.

Both the tax-exempt and taxable bonds are exempt from state taxes.

The ULTGO bonds are secured by the city's full faith and credit and its ad valorem tax, without limitation as to rate or amount. The LTGO bonds are secured by the city's full faith and credit and its ad valorem tax, subject to a 10-mill limitation. The city also pledges to pay a portion of enterprise fund debt service from user fees produced by water, sewer, and storm-water systems.

Columbus is rated triple-A across the board.

The city is the state capital and seat of Franklin County and has about 879,000 residents, making it the 14th most populous city in the nation. Population has grown 11.7% since 2010 versus 1.1% for the state, according to Moody’s.

The city has roughly $1.8 billion of debt outstanding. Nearly all of the city's general obligation debt is secured by an unlimited property tax levy; however, the city utilizes one-quarter of its income tax receipts to pay debt service.

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