A Florida city brings its first green bond deal to market
Oakland Park, Florida, prices $10.1 million of green water and sewer revenue bonds Wednesday.
S&P Global Ratings gave the refunding its highest Green Evaluation score of E1, and rated the bonds AA with a stable outlook.
The tax-exempt bond proceeds will advance refund the city’s 2010B Build America Bonds with no extension of maturity.
RBC Capital Markets is the sole underwriter.
The deal is expected to be structured with serial maturities between 2021 and 2040.
The BABs are being refunded in part to eliminate the “inconsistency” due to reductions in the federal subsidy required because of sequestration, said city Financial Services Director Andrew Thompson.
Thompson said the city estimates the refunding will receive present value savings “in excess of $1.5 million.”
The deal is the city’s first green bond issuance, he said, adding that he was pleased that the refunding obtained S&P’s highest score.
“We were very interested in getting that designation, that credential, because overall our city commission and city management have been very dedicated to pursuing environmentally responsible issues and climate change,” Thompson said.
The city also believed that the projects constructed with the 2010 bond proceeds would qualify for S&P’s evaluation process, he said.
S&P’s green evaluation cited the city's satisfactory transparency in reporting on the use of proceeds, its governance in demonstrating that the 2010 bond proceeds were spent on environmentally beneficial projects, and an “excellent” mitigation score reflecting that the projects increased the quantity of freshwater available in the local aquifer.
S&P said in its view, the expected reductions in water and energy usage because of the city's projects will have a “significant environmental impact.”
Oakland Park is in Broward County about 2.5 miles north of downtown Fort Lauderdale on the east coast. The city’s population was just over 45,000 as of July 1, 2018, according to the U.S. Census Bureau.
Thompson said the city is close to the Atlantic Ocean, and that it’s “crisscrossed with ocean-access canals so sea level rise is a real phenomenon for us.”
Oakland Park joined with the neighboring city of Wilson Manners to adopt a climate action plan, and plans to hire a sustainability manager.
“We’re trying to do what we can as a relatively small city in south Florida to do our part,” Thompson said. “We want to make sure we’re not just serving our community today but our community tomorrow.”
S&P said its bond rating reflects the city utility's “very strong” enterprise and financial risk profiles and a service base that benefits from access to the diverse Miami-Fort Lauderdale-West Palm Beach metropolitan statistical area.
The utility also has water and sewer rates that S&P considers affordable but slightly elevated, and officials have proactive rate-setting practices as well as strong operational management policies and practices.
All-in debt service coverage averages 2 times historically and the utility had $17.5 million in available reserves at the end of fiscal 2018, S&P said.
Oakland Park expects to return to the bond market in the first or second quarter of next year to issue the first round of general bonds for $40 million in voter-approved city improvements, Thompson said.
Dunlap & Associates Inc. is the city’s independent municipal advisor.
Mark E. Raymond is bond and disclosure counsel. Greenberg Traurig PA is counsel to the underwriter.