CHICAGO — Columbus, Ohio will offer buyers high-grade paper beginning Monday when it takes retail orders on a $320 million sale of general obligation notes and bonds to help cover its annual spending on capital projects.

The institutional pricing is set for Tuesday. Proceeds will finance "the city's capital improvement program which includes water, sewer, safety, and transportation projects ," said assistant auditor Megan Kilgore. Auditor Hugh Dorrian's office manages the city's borrowing.

Ahead of the sale, all three rating agencies affirmed the city's triple-A ratings which apply to $2.4 billion of post-sale GO debt.

Bank of America Merrill Lynch is senior manager with Fifth Third Securities Inc. and Stifel Nicolaus & Co. Inc. acting as co-senior managers. Bricker & Eckler LLP is bond counsel and PRISM Municipal Advisors LLC is advising the city.

The sale includes five series of limited tax notes and bonds, including several that are taxable. Most of the borrowing will generate new money for capital projects with a small piece representing a rollover of existing notes.

The city's Aaa rating reflects its "large and diverse economy that benefits from stabilizing institutions; conservatively managed debt profile strengthened by substantial untapped levy authority; and satisfactory financial operations that are supported by ample alternate liquidity and prudent fiscal policies and management," Moody's wrote. The city is home to Ohio State University and as the state capital houses state and federal offices.

The city both cut spending and dipped into reserves during 2008 and 2009 due to balance sheet erosion during the recession but its picture has steadily brightened since 2010 and it has been moving to replenish reserves.

An 25% increase in the city's income tax rate to 2.5% from 2% in 2009 has also contributed to the recovery of the city's books. Income tax revenues accounted for 62% of general fund revenues in 2008 rising to 73% in 2012.

The city's 2012 unrestricted general fund balance equaled 16.5% of spending, up from a low of 8.2% in 2009. The city has a goal to bring its economic stabilization fund, which is counted as part of its unrestricted general fund balance, to $75 million by the close of 2018. It's currently at $53 million, up from $40 million at the end of 2012, Fitch said.

The city also maintains unrestricted reserves of $160 million in a special income tax fund that provides an additional cushion. City revenues are tracking ahead of budgeted estimates so far this year.

The city's challenges include a dependence on income tax revenues which are economically sensitive and drove past dips into reserves. Ongoing reductions in state aid are also expected.

The city has an ongoing $2 billion capital improvement program and will have about $400 million of authorized unissued debt after the current issue. Officials anticipate requesting an additional $842 million in debt authorization on the November 2013 election ballot to finance various health & safety, parks & recreation, public service/streets, and water, storm sewer and electric projects. It would cover the city's capital needs for at least four years.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.