CHICAGO — Columbus, Ohio, will begin taking retail orders today on $279 million of general obligation debt in a transaction that features five series, including the city’s first Build America Bonds and recovery zone economic development bonds.

The city heads to market the day after Ohio voters were to decide whether to allow casino gambling in Columbus and the state’s other three biggest cities, Cincinnati, Cleveland, and Toledo.

If approved, the measure could mean $650 million in additional revenue for the state’s local governments from a 33% tax on casino profits and a $50 million per-casino license.

The cities hosting the gaming venues would also likely see a boost in their income tax collections from an influx of new jobs.

In the municipal election, Columbus’ well-known auditor, Hugh Dorrian, will run uncontested for his 11th term, putting his tenure in office at 44 straight years at the end of his term.

The triple-A rated city last sold GOs in 2007. It maintains voter permission to borrow more than $1.6 billion, but city officials postponed selling bonds until voters approve an income tax increase in August. The measure pushed the city’s income tax to 2.5%.

“Because of the economy, we put on hold all bond sales,” said Megan Kilgore, Columbus’ assistant auditor. “We simply were not going to do it until, with the income tax passage, the monies start flowing in.”

Credit analysts praised the city’s move to increase its income tax amid a recession, and warned that other Ohio cities — most of which also rely heavily on the tax for operating revenue — should make similar moves to shore up declining general funds through next year.

Today’s transactions features five series of debt that are a mix of serial and term bonds with maturities ranging from 2019 through 2030.

“We did a lot of analysis, especially in the early stages, trying to make sure where the maximum benefits were with BABs versus traditional tax-exempts staying within 20 years,” Kilgore said. “This present scenario is what we came up with as the most advantageous.”

The transaction includes $184 million of unlimited-tax, direct-payment BABs, $12.6 million of limited-tax, direct-payment BABs, and $16.3 million of unlimited-tax, direct-payment recovery zone economic development bonds, which is the city’s full allotment of the bonds under the federal stimulus act. The transaction also includes $56.4 million series of unlimited-tax GOs and $9.6 million of limited-tax GOs.

The traditional tax-exempt debt matures first, followed by the BABs and then the recovery zone bonds. The two traditional tax-exempt series feature maturities of 2015 and 2019, keeping with the city’s informal policy of repaying much of its debt within 10 years.

The BAB series features a mix of serial and term bonds, with $109 million of unlimited-tax serials maturing in 2021 and $7.6 million of limited-tax serial BABs maturing in 2017. Another $46.3 million of term BABs mature in 2025 and $28 million of term BABs mature in 2029. A $4.9 million series of term BABs mature in 2030, and the $16.3 million series of unlimited-tax recovery zone term bonds mature in 2030.

Columbus is also considering refunding up to $38 million of fixed-rate debt as part of the transaction.

Stifel. Nicolaus & Co. is the senior underwriter, leading a team of six additional firms. Brickler & Eckler LLP is the city’s bond counsel. Prism Municipal Advisors LLC is financial adviser.

Moody’s Investors Service, Standard & Poor’s and Fitch Ratings affirmed their triple-A ratings on Columbus ahead of the sale. 

Proceeds from the new-money sales will finance a series of capital improvement projects, including work on sanitary and storm sewer systems and water plants, as well as various transportation and parks and recreation projects.

The borrowing comes a week before Mayor Michael Coleman unveils a $655 million fiscal 2010 budget. The spending plan includes no new taxes or fee increases and is expected to maintain a balance in Columbus’ dwindling reserve fund — one of the city’s chief weaknesses, according to credit analysts.

Coleman, who opposes the casino expansion plan — the mayors of the other three cities are in favor of it — has not built into his budget any new gaming revenue, according to Jane Dunham, the city’s financial management division administrator.

The budget includes a $414.2 million capital improvement plan for 2010, Dunham said.

While a bright spot in the struggling state, Columbus still faces financial challenges stemming from its heavy reliance on income tax revenue, an economically volatile revenue source.

After suffering two years of revenue declines that forced the city to dip into its cash reserve fund, the new money from the tax increase will be used to maintain, not increase, services, according to Kilgore.

“While a boon to the city, this does not give us the ability to grow,” she said.

Columbus expects to collect up to $15 million in additional revenue from the tax increase by the end of 2009 and up to $100 million annually after that.

In revenue estimates released last week, the auditor projected that the city would need to spend $35 million of its reserve fund in the current fiscal year, leaving a balance of $10 million at the end of the year. Without the new income-tax increase, the city would have been forced to drain the fund.

“The administration is committed to restoring the rainy-day fund, and recognizes that’s one of our weaknesses,” Kilgore said. “When times were tough, we had to dip into that fund — that’s what it’s there for.”

Standard & Poor’s and Moody’s analysts said they expect city officials to rebuild the reserves as the economy begins to grow, and said the failure to do so could lead to a downgrade.

The city plans to enter the market again Dec. 1 to refund up to $37.6 million of one-year notes that come due in mid-December. It will be a competitive transaction, Kilgore said.

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