DALLAS - The Dallas suburb of Frisco will come to market on June 3 with a $117 million offering of certificates of obligation that will finance a number of projects, including a professional soccer stadium and complex for the Major League Soccer franchise, the Dallas Burn.
The sale had been scheduled for last week, but officials moved the date to allow time to finalize contracts with several private partners who are working with the city on projects to be financed by the deal, which includes a combination of tax-exempt and taxable bonds.
Certificates of obligation are a financing mechanism used by many Texas municipalities to pay for general infrastructure projects. Similar to general obligation bonds, certificates are backed by ad valorem property taxes. However, unlike general obligation bonds, the certificates do not have to be approved by voters. Instead, issuers publish notices of intent, informing residents of their plan to issue certificates. If residents oppose a CO sale, they can file a petition to force a public vote on the matter.
RBC Dain Rauscher Inc. will be the senior manager for the transaction, with SWS Securities Inc., Morgan Keegan & Co., Estrada Hinojosa & Co., and Banc of America Securities serving as co-managers. First Southwest Co. is the city's financial adviser and McCall Parkhurst & Horton serves as bond counsel.
Frisco's certificates will have a 20-year maturity and are expected to be insured, said Nell Lange, director of administrative services for the city.
Frisco is rated A-plus by Standard & Poor's and A1 by Moody's Investors Service. Fitch Ratings does not rate the credit.
According to the North Texas Council of Governments, Frisco is one of the fastest-growing cities in Texas. The most recent U.S. Census indicated it was the second-fastest growing city in the country among those with populations between 10,000 and 50,000. The city has a current population of about 60,000, and that number is expected to increase to about 74,000 by 2005.
Lange said she believed the deal would fare well in the market.
"There already has been a lot of interest in this sale -- even from individual citizens who say they want to buy these bonds," she said.
Lange noted that First Southwest had indicated it recently completed a deal with an interest cost in the vicinity of 3.75%. "We've run all our numbers at 4.5%, but of course we'd be ecstatic if the market stays where it is and we can pay interest rates lower than 4% on this deal."
The deal includes approximately $102 million of tax-exempt certificates of obligation, with the remainder of the deal selling as taxable securities. The taxable component includes costs for several projects that are being shared by developers.
Those projects include a convention center that is being built in partnership with the developer of a new Embassy Suites hotel in Frisco. The city is paying for the lion's share of this project, but the developer is paying for a parking garage and part of the convention center.
"We had to do a taxable piece in this transaction because of agreements with developers," Lange said, adding that about $12 million of the convention center project will be financed with taxable debt.
Similarly, about $3.5 million of taxable debt will be issued for the Frisco Square Management District, which when completed will be home to a new City Hall and feature retail and residential development. It is being developed in partnership with a private company.
"They are focusing on developing retail and residential projects in the area," Lange said. "The city will put in the roads and other infrastructure."
The tax-exempt portion of the deal includes $25 million to beef up the city's water and wastewater system, including about $10 million that will be used for a new public works facility.
About $19 million of tax-exempt debt will be used for the convention center project, $2.7 million will go for general projects, and $55 million will finance a new soccer complex that will be used by the Dallas Burn, the Frisco Independent School District, and city and county youth and recreation leagues.
The project is a public-private partnership involving the city, the school district, Collin County, and Hunt Sports Group, which owns the Dallas Burn. The complex will feature a 20,000-seat home for the Major League Soccer team and will host high school varsity games. It will have 17 tournament-grade fields for youth and high school soccer.
The multi-purpose stadium will be located on about 100 acres near the Frisco Town Square. It will also be available for concerts, public entertainment, and community events.
"We have joint agreements all over the place with this deal," Lange said. "It's just a great deal for the community."
Frisco will likely access the market again within the next 60 days, when it sells $90 million of general obligation bonds to finance projects related to its City Hall project.
