CHICAGO — The Indianapolis Local Public Improvement Bond Bank tomorrow or Wednesday plans to price $112.3 million of notes to cover short-term cash-flow deficits for the city, Marion County, and the Indianapolis-Marion County Public Library.
The issue is part of the bond bank’s regular, twice-annual borrowing to help local governments cover a mismatch in timing between expenditures and an influx of revenue.
In addition to the regular timing mismatch, municipalities across Indiana have in recent years experienced longer-than-usual delays in property tax collection as a result of changes in property tax assessments as well as a special reassessment ordered by Gov. Mitch Daniels in 2007.
The change in how properties are assessed, called trending, has meant that many local governments — including Indianapolis and Marion County — have sent out property tax bills months, and sometimes years, behind schedule.
This week’s borrowing marks the first time since 2007 that the city expects to return to a regular bill and collection cycle, said Indianapolis Controller David Reynolds.
“It’s taken us a couple years to get back on track but we’ll be back on the normal billing cycle next year,” he said.
A regular billing cycle means the city will have to borrow less using short-term debt than in the last few years, according to Reynolds. “The trend of it going down shows our continued improvement in financial health,” he said.
City Securities is the underwriter on the deal. Ice Miller LLP is bond counsel. The $112.3 million issue includes $25 million of previously issued notes that are due this month and will be rolled over to mature in March 2010.
The finance team expects to capture an interest rate of 60 to 80 basis points, which is about typical for the note issuance, said bond bank executive director Kevin Taylor.
“By all indications we’re going to see very strong demand at very good levels,” he said.
Meanwhile, the city is gearing up for a pair of larger, longer-term borrowings early next year, according to Taylor.
The Marion County Health and Hospital Corp. plans to sell $200 million of general obligation bonds and the Indianapolis-Marion County Building Authority plans to sell $400 million of debt. The borrowings will finance a new, 1.2-million-square-foot complex for Wishard Health Services.
The $750 million project will be financed largely with debt. Citi will senior manage the deal.
The borrowings come as Indianapolis-Marion County enters fiscal 2010 under a new $2.1 billion budget that includes, for the first time in memory, money set aside in a rainy-day fund.
The budget covers an expected loss of $28 million in property tax revenue tied to the state’s new tax cap law, and sets aside $16 million in a rainy day fund.
“We’ve been able to put the money aside somewhat in preparation for 2011 and 2012, which we believe are going to be tough years, especially on the income tax side,” Reynolds said. “The effect the state is feeling right now [with declining income-tax revenues], cities across Indiana are going to be feeling that in ’11 and ’12.”