CHICAGO — The Board of Commissioners of Cook County, Ill., Tuesday approved a $100 million bond deal that will mark the county’s first sales-tax-backed bond sale.
The transaction is tentatively set for the week of Aug. 9.
Wells Fargo is senior manager and Rice Financial Products is co-senior. Ramirez & Co., JPMorgan, BMO Capital Markets, PNC Capital Markets and George K. Baum & Co. are co-managers. AC Advisory is financial advisor and Mayer Brown LLP is bond counsel.
Proceeds from the deal will be used to finance highway construction projects. The county had planned to use motor fuel taxes to back the bonds, but opted for sales tax revenue as a stronger pledge, according to Cook County chief financial officer Tariq Malhance.
“Since these are basically motor vehicle construction projects, we wanted to use motor fuel tax to support these bonds, but our underwriters convinced us that a sales tax [pledge] will save us 25 to 30 basis points, or $7 million,” Malhance said in a telephone interview after Tuesday’s board meeting.
The state of Illinois collects and remits the motor fuel tax, and could make changes to the revenue stream that would affect the pledge and bondholder security, Malhance said. The state’s motor fuel tax is 19 cents per gallon, while Cook County’s is six cents on the gallon.
The county’s sales tax has been declining the last few years due partly to a rollback of a controversial 1% increase enacted in 2008. But overall it is a robust revenue source that will provide more than 45 times coverage of annual debt service, county officials said.
Cook will pay the roughly $7 million of annual debt service on the bonds with the sales tax revenue, but expects to reimburse its general fund with the motor fuel tax, Malhance said.
The bonds will be structured as serials with a 25-year final maturity.