WASHINGTON — District of Columbia residents purchased more than $100 million of the city’s latest bond sale of $314 million of income tax-secured revenue refunding bonds, which saved more than $35 million in interest expense, or more than 10% of the refunded principal amount, officials said.
The proceeds were used to refinance $335 million of outstanding general obligation bonds. The bonds will continue funding for infrastructure projects such as school modernization, recreation centers, police and fire facilities, repair of roads and bridges, and technology infrastructure, said David Umansky, a spokesman for the city’s chief financial officer, Natwar Gandhi.
The savings were in line with the “in excess of 8%” savings that Gandhi’s office said it expected from the May 2 sale.
District of Columbia residents were given priority to purchase the bonds, which were oversubscribed. Officials made an effort to market the bonds around the city, placing notices online, with local media, and in radio and subway advertisements.
As a result of demand outstripping supply, Umansky said, district officials were able to reprice the bonds during the sale to achieve lower interest rates on the issue.
“We are pleased that the demand for district bonds is stronger now than ever, which translates into lower borrowing costs and more money for critical programs,” Gandhi said.
District Council chairman Kwame Brown said the high demand for the bonds is “a clear sign that residents believe in the long-term fiscal strength and financial stability of the city.”
The bonds are secured only by the district’s income tax revenues, and not by its general taxing power. The city is not permitted to collect income taxes from nonresidents, even though they work in the district. Including this bond issue, the local government has about $3.2 billion in outstanding income-tax-backed securities.
“In fiscal year 2013, we expect to sell more than $800 million in income-tax bonds to provide funding for the district’s capital improvements program,” said Treasurer and deputy CFO Lasana Mack. The CIP includes funding for schools, transportation, parks and recreation, and other governmental purposes.
The district is planning another bond sale for the first week of June, when it plans to sell bonds backed by property and sales tax increases generated by the Gallery Place development in downtown Washington.
