DALLAS — Dallas will go to market Dec. 9 with its only deal of the year, combining refunding and new money in a $530 million issue that includes bonds authorized 16 years ago for the Trinity River Corridor.
The negotiated deal is pricing through negotiation with book-runner Wells Fargo Securities, led by managing director Frank Farley. Loop Capital Markets is co-senior manager in a syndicate that includes seven other underwriters.
Wayne Placide, senior vice president at First Southwest Co., and Noe Hinojosa Jr., chief executive of Estrada Hinojosa & Co., are co-financial advisors.
The deal is expected to include $324 million of new money and the remainder for refunding of bonds issued in 2005, 2007, and 2008. The city is also taking out $26.5 million of commercial paper.
"We continue to enjoy low rates, so we thought this would be a good opportunity to sweep the commercial paper balance," Hinojosa said.
Jeanne Chipperfield, chief financial officer for the city, said the size of the refunding could vary with the rates available in the market on the day of pricing. The City Council authorized an issue of up to $635 million.
"It's a pretty big refunding," she said. "We anticipate net present value savings of about $18 million or 7.3%."
City officials are predicting a true interest cost of 2.794% on the bonds that have an average maturity of 9.6 years.
The bonds carry Dallas's general obligation ratings of AA-plus from Standard & Poor's and Aa1 from Moody's Investors Service.
"The Aa1 reflects improvement in key credit fundamentals including a strong local economy with the largest employment base in the metropolitan area, recovery and recently strong growth in taxable values driven by residential and commercial construction, and improved fiscal performance marked by three recent years of audited General Fund surpluses," Moody's analyst Adebola Kushimo wrote in her Nov. 13 report.
With this deal, Dallas will have about $1.8 billion of GO debt outstanding, according to Moody's.
About $20 million of this issue will go toward the Trinity River Corridor, a project approved by voters in 1998 to transform the neglected river near downtown into more accessible park space.
The project grew controversial in 2007 when the city added a proposed six-to-eight-lane toll road to the concept, causing some voters to feel misled.
The 1998 bond proposal for the project allowed for a "parkway" within the 10,000-acre area. But by 2007, Dallas business and political leaders had convinced the city to convert that to a tollway to be operated by the North Texas Tollway Authority with no entrance or exit ramps near the park.
After the Army Corps of Engineers said the tollway would have to be located inside the proposed park to avoid stressing the river's levees, city councilwoman Angela Hunt and local activists argued that the highway would cripple the planned development.
In a 2007 referendum, voters approved the construction of the toll road, though some complained that the wording of the ballot was confusing.
At an estimated cost of $1.5 billion, the proposed Trinity Parkway would connect Interstate 35E to U.S. 175, providing a 9-mile bypass around the west and south sides of Dallas' central business district.
Former Dallas Mayor Laura Miller told the Dallas Morning News recently that "the reason the road should go away" is because it has become "just an airplane runway instead of a parkway."
Federal officials told the News recently that the plan for the high-speed highway through the park cannot be altered under the current environmental clearance process.
The NTTA is managing engineering efforts to advance the project, using $84 million authorized by Dallas voters in 1998. However, only about $265 million in funding has been identified, so far. The project may go through a market valuation process through NTTA and the Texas Department of Transportation, as outlined in Senate Bill 792, passed by the 80th Texas Legislature.
In the meantime, efforts to improve the river's appeal have been completed or are well underway.
The Margaret Hunt Hill Bridge, designed by Spanish architect Santiago Calatrava, opened in 2012 at a cost of $120 million. With the opening of the MHH Bridge, the city was able to convert the 81-year-old Continental Avenue Bridge into a walking bridge that provides a place for recreational activities.
The next Calatrava bridge project, replacing a concrete span for Interstate 30, is already underway as part of the $798 million Horseshoe Project supervised by TxDOT.
The ambitious project is designed to unsnarl the mixmaster where Dallas' multi-lane Interstate 30 and 35E freeways intersect. The project is known informally as "Fixin' the Mix."
The project includes expansion, repaving and addition of several new bridges and roadways along interstates 30 and 35E as well as the Calatrava-designed Margaret McDermott Bridge for I-30.
The project started in April 2013 and could be complete as early as 2017, according to TxDOT.
Beneath the bridges, the city has continued to build trails, horse parks, nature centers and other attractions for recreation-minded citizens.
The Trinity River Audubon Center that opened in 2008 represents a $37 million restoration that followed a court order to clean up land that had long been used an illegal construction landfill site. Now, the land is owned by the city and the center is operated by the National Audubon Society.
Another landfill site will be reclaimed as a semi-private golf course that will serve the Southern Methodist University golf team and host future Byron Nelson golf tournaments.
The Trinity River Corridor project ties in with city efforts to invigorate West and South Dallas, areas once consigned to the racial minorities and deprived of city services and home mortgages available in the more affluent North and East Dallas neighborhoods.
Dallas Mayor Mike Rawlings has championed development of the southern half of the city with his GrowSouth initiative designed to increase employment, quality of life and economic investment. Rawlings recently announced plans to seek a second term, saying that he needs another four years to advance his goals.
While its suburbs have boomed in the past decade, the city's population has flattened out to about 1.2 million people. Like Rawlings, urban planners see the greatest growth potential in underdeveloped or neglected areas of southern Dallas.
Citywide, taxable values have shown three years of improvement, following three years of contraction. During the Great Recession, values declined by almost 10%. Since then, recovery and new construction have driven growth, with taxable values of $93.1 billion in fiscal year 2015.
The city expects to issue about $225 million of bonds in 2016 and $125 million in 2017 for general infrastructure improvements if the tax base grows enough to support the debt. If issued, the new bonds would boost net direct debt to roughly 179% of total governmental revenue, according to Standard & Poor's.
"We do not expect to revise the ratings within the two-year outlook time frame because we believe the city will maintain very strong reserves and continue to serve as an anchor in the broad and diverse Dallas-Fort Worth MSA [metropolitan statistical area]," Standard & Poor's analyst Jennifer Garza said.
"Should the debt and contingent liabilities profile improve, we could raise the ratings," she added. "Deterioration in the city's budget flexibility, performance, or liquidity could result in a downgrade."
