Austin City Council OKs up to $648 million debt sale

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Austin, Texas, expects to bring a competitive issue to market in September after the city council on Thursday approved up to $648.4 million of property tax-backed debt.

The offering comes after Moody's Ratings in July raised the city's general obligation rating a notch to Aaa, citing improvements in employee pension and other post-employment benefits liabilities.

Austin has triple-A GO ratings from S&P Global Ratings and Fitch Ratings, which restored its rating to AAA in September, following a downgrade to AA-plus in 2021. These two rating agencies are expected to rate the upcoming issue, according to a draft preliminary official statement for a Sept. 22 sale.

It shows $289.37 million of public improvement and refunding bonds, $133.24 million of certificates of obligation, $67.34 of taxable public improvement bonds, and $13.52 million of taxable certificates of obligation structured with serial maturities from 2027 through 2046. Public property finance contractual obligations totaling $80.34 million have maturities from 2027 through 2033.

An up to $101.6 million refunding component for debt service savings involves bonds and certificates of obligation sold in 2012 and 2016, according to a city memo. New money debt will finance various capital projects, as well as vehicles and equipment.

PFM Financial Advisors is the municipal advisor, while McCall, Parkhurst & Horton is bond counsel and Orrick, Herrington & Sutcliffe is disclosure counsel.

Texas' capital city's last property tax-backed issue sold competitively was a $318.6 million offering in 2021, according to deal information posted on the Municipal Securities Rulemaking Board's EMMA website. Annual issues since then have been negotiated sales.

Earlier this month, the city council passed a $6.6 billion fiscal 2027 budget that includes $1.5 billion in general fund spending and increases the maintenance and operations property tax rate to the maximum level allowed under state law, while hiking fees for electricity, trash service, water, and drainage to cover escalating operation costs.

An April forecast indicated a $26.4 million general fund deficit for the fiscal year that begins Oct. 1 under a no-new property tax revenue rate. The gap was projected to rise to $64 million in fiscal 2028 and to $71.4 million in fiscal 2029.