Columbus, Ohio, pursues local retail for GO bond sale
Columbus, Ohio, is expanding the number of local brokerages participating in the retail order period on its $345 million bond sale this week.
The city is returning for a second time with a program that allows residents to earn tax-exempt income by buying into the city’s debt portfolio. The city will hold a retail order period Wednesday and the institutional pricing is set for Thursday.
“Whenever you are able to take Wall Street and intersect it with Main Street we can come up with some really spectacularly creative ideas to solve social issues that frankly so many of our communities are facing,” city Auditor Megan Kilgore said.
Kilgore first introduced the program in 2018 in a sale that resulted in over $5 million in bonds being sold to individual investors, which Kilgore considered a "spectacular success."
This year the city is expanding area brokerages that are participating. The brokerages have to be dealers that can execute a bond transaction.
A total of 19 firms including the selling group members will be participating. Anyone with an account with one of the listed firms can buy on the day of the sale.
“We have added more selling group members and have been more thoughtful about our dissemination of information about the transaction to the community,” Kilgore said.
Kilgore said that one of the indirect benefits of the program has been the increased awareness of the city's capital projects.
“One unintended benefit was the amount of participation during the capital planning period process,” Kilgore said. “Instead of having just one or two large meetings, the council took the capital plan out to community and had a series of neighborhood level meetings. Overall there is a great desire for democratization of our local governments into the community.”
The city will sell roughly $310 million of new money, tax-exempt bonds that will be used to fund capital projects that include clean water, recreational parks and a new fire station. It will sell $35 million to refund taxable debt the city issued in 2019 which should yield $3.5 million of present value savings, said Kilgore.
The deal offers $260 million of unlimited tax general obligation tax-exempt paper; $18 million of limited tax, tax-exempt GOs; $13.3 million ULTGO that are taxable; and $19 million of LTGOs that are also taxable.
The city has cut the lowest denominations to purchase the $18 million LTGO Series 2019 B 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 local infrastructure projects.
“The fact is that we currently have taxable bonds that are ripe for refunding and we are going to aggressively move forward to maximize as much savings as we possibly can, given the interest rate environment,” Kilgore said.
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 GO debt service from user fees produced by water, sewer and storm-water systems.
Bank of America Merrill Lynch and Goldman Sachs are the senior managers. Huntington Capital Markets, PNC Capital Markets and Stifel Nicolaus are the co-managers. The first-day selling group adds 14 local offices.
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. It is one of the largest cities in the nation that has triple-A bond ratings from all three major rating agencies.
The city has roughly $5 billion of debt outstanding.