BRADENTON, Fla. — Gilt-edged Louisville, Ky., provides investors with an opportunity to buy high-quality bonds with combined refunding and new-money offerings of nearly $50 million on Tuesday and May 30.
After those deals price, it could be several years before the Louisville-Jefferson County Metro Government is back in the market for another sizeable new-money deal, according to chief financial officer Steve Rowland.
Sealed competitive bids will be opened Tuesday for the Parking Authority of River City Inc.’s issuance of $11.27 million of new, first-mortgage revenue bonds designated as Series A and $19.15 million of Series B refunding bonds.
J.J.B. Hilliard, W.L. Lyons LLC is financial advisor and Rubin & Hays is bond counsel on the first offering since 2010 for PARC, a nonprofit component unit of Louisville.
Proceeds of the Series A bonds will be used to purchase two employee parking lots from the city. PARC will manage and own the lots though a lease with Metro. The lease and other revenues such as on-street parking meter collections will secure the limited-obligation bonds, which mature between 2014 and 2033.
The 2013B bonds will refund debt issued in 2001 and 2002 for debt-service savings. The bonds will be refunded within existing maturities between 2013 and 2032. This portion of the deal is expected to attain net present value savings of $3.2 million or 19.7% of refunded par amount, said Rowland.
Standard & Poor’s assigned its AA rating to the PARC transaction. City officials said Moody’s Investors Service is expected to rate the bonds Aa2, though the official rating had not been released at press time.
Louisville will be back in the market May 30 to auction four series of general obligation bonds with Hilliard Lyons as FA.
Proceeds of $9.83 million of new-money Series A bonds will be used to build and equip a new library branch.
The GO refunding component of the offering will consist of $18.34 million of Series B tax exempt advance-refunding bonds, $710,000 of Series C taxable bonds, and $9.16 million of Series D tax exempt current-refunding bonds.
Combined net present value savings for the GO refundings is anticipated to be $2.8 million or 10.2% of refunded par.
Louisville’s transactions are expected to elicit “robust” bidding, in part, because the city is a well-known credit in the Commonwealth, according to Hilliard Lyons.
“We’re very pleased when looking at the estimate percentage of savings, which well exceeds the minimums required,” said Rowland, referring to general industry recommendations for refunding saving limits between 3% and 5%.
Both the PARC and general obligation transactions are expected to elicit “robust” bidding, in part, because Louisville’s is a well-known credit in the Commonwealth, according to Hilliard Lyons.
The GO deal is rated AAA by Fitch Ratings and AA-plus by S&P. Both agencies said the outlook is stable. Moody’s had not released a rating at press time.
Fitch also affirmed its AAA on $305.5 million of outstanding unlimited tax general obligation bonds, and S&P confirmed its AA-plus rating on the debt.
Rowland said he was happy with Fitch’s renewal of the city’s triple-A rating, which reflects, in part, rebounding of the local economy and a flexible management structure that dealt with fiscal hurdles as a result of the recession. Louisville has seen 13 consecutive quarters of growth in the local occupational tax.
“Property assessments are beginning to show signs of improvement,” he said. “I think we’re on the upswing.”
Metro is not expected to return to the new-money bond market for another year or longer until debt capacity opens up, said Rowland. The city’s policy is to appropriate about 15% of its budget for capital needs financed with debt service or on a pay-as-you-go basis. As principal debt is retired, new bond capacity will become available in 2015 and 2017.
The city also hopes to obtain new revenue for capital projects though an initiative pursued by Mayor Greg Fisher, according to Rowland.
Fisher is leading an effort to obtain legislative approval next year for a constitutional amendment that would provide Kentucky’s municipalities with an option to enact a local sales tax. If approved by the Legislature, the amendment would require a statewide referendum.