DALLAS — As voters prepare to consider more than $600 million of new bonding authority, the city of Dallas will refund $220 million of general obligation bond debt to start its new fiscal year.
The bonds will be priced through negotiation Tuesday with M.R. Beal & Co. and Bank of America Merrill Lynch as senior managers.
First Southwest Co. and Estrada Hinojosa & Co. share duties as financial advisors. Bracewell & Giuliani and West & Associates are bond counsel.
The bonds earned ratings of AA-plus from Standard & Poor’s and Aa1 from Moody’s Investors Service, both with stable outlooks. Fitch Ratings does not rate the debt.
“The ratings reflect our view of the city’s very deep and diverse economic fundamentals, which have helped the city’s employment base to withstand the current recession, to the extent the Dallas metropolitan statistical area has been less affected in areas such as layoffs, foreclosures and major tax revenue declines compared to other comparably sized cities,” S&P analysts Jennifer Garza and Theodore Chapman wrote.
With the assessed valuation of property in the city increasing after hitting a low last year, Dallas was able to increase its bond proposal going to the voters on Nov. 6 to $600 million.
The original bond proposal under consideration last year had been about $500 million. By April, with assessments up, the amount that could be issued without a tax hike was set at $600 million.
A report earlier this year from the Dallas Central Appraisal District raised the city’s 2012 tax base by about 2% to $79 billion. The total assessed tax base includes $35.9 billion of residential property, $30.7 billion of commercial valuations and $12.3 billion of business personal property.
If voters approve the GO bonds, Dallas plans to issue the new debt as 20-year bonds with level principal payments.
Dallas has $1.66 billion of outstanding GOs. Other outstanding debt includes $1.8 billion of water utility revenue bonds and $480 million of Build America Bonds supported by revenues and taxes from a convention center hotel.
The list of projects to be financed with the proposed $600 million of proceeds includes $323.8 million of drainage and flood control facilities, $221.2 million of street and transportation work, and $55 million for economic development in southern Dallas and transportation-oriented development across the city.
With about 1.2 million residents, Dallas is the nation’s ninth largest city and the hub of a Dallas-Fort Worth metropolitan area that ranks fourth in the nation in population.
When the financial collapse hit in 2008, Dallas and other governments in the area found ways to continue funding major projects, particularly in transportation.
Dallas Area Rapid Transit, which relies on sales tax revenue and whose board members include appointees from the city, continued expansion of its light-rail system, completing the $1.7 billion, 28.6-mile Green Line to the suburb of Carrollton north of Dallas and launching the $1.8 billion, 14-mile Orange Line to Irving and Dallas-Fort Worth International Airport.
With the opening of the Green Line on Dec. 6, 2010, DART became the largest light-rail operator in the United States, with 72 miles of track. The Orange Line is scheduled to begin service to DFW Airport in 2014.
In 2009, Dallas also approved a $519 million master plan to rebuild the terminal of Love Field Airport under a new agreement with Southwest Airlines, whose revenues backed the bonds issued for the project.
That project is also scheduled for completion in 2014, when Southwest will be allowed to fly to any destination from the airport for the first time since DFW International opened in 1974.
Under the so-called Wright Amendment, named for former Fort Worth Congressman Jim Wright, Love Field flights were restricted to Texas and neighboring states to limit competition with DFW.
Dallas also placed a $480 million bet on its convention center in the depths of the recession, approving construction of a bond-financed convention center hotel in 2009. The city was able to use the newly approved Build America Bonds for an Omni Hotel.
In conjunction with the GO refunding, Standard & Poor’s last week also affirmed its A-plus long-term rating and stable outlook on the 2009 taxable BABs issued by the conduit Dallas Convention Center Hotel Development Corp. for the convention center hotel.
The 1,016 room Omni hotel opened ahead of schedule during the fall of 2011 and is currently at 65% occupancy, nearly 10% above the original projections, according to analysts.
The debt-service schedule indicates principal repayment on the Series 2009A bonds beginning in 2018, principal repayment of the Series 2009B bonds beginning in 2026 and principal repayment of the 2009C bonds in 2015. The debt-service requirement steadily increases to roughly $41.3 million in 2027 from $31.6 million in 2013.
If hotel tax revenues fall short of the annual debt service, the trustee will be able to access a $41 million debt-service reserve fund.
If the city needed to make the full debt-service payment for the corporation, the city could raise the tax rate by 3.7 cents per $100 of assessed value, providing $32 million in revenue.
Former Dallas Mayor Tom Leppert was the fiercest advocate for the convention hotel, saying the city would fall back into second-tier status among convention cities without one.
Dallas was one of the few major convention cities without a hotel attached to its convention center.
Dallas’s Parkland Hospital, which serves Dallas and surrounding counties, also used BABs to raise $900 million construction of a new hospital near downtown. The new Parkland is also scheduled to open in 2014.
Another major project underway is the $2.7 billion reconstruction of Interstate 635, also known as LBJ Freeway.
The freeway project is financed in part with backing from the Dallas Police and Firefighters Pension Fund and is headed by private contractor Cintra, a Spanish developer with an office in Austin.