CHICAGO – Fresh from winning voter approval to continue collecting a key tax stream, Kansas City, Mo. heads into the market Thursday with a $332 million new money and refunding special obligation backed issue.
Citi senior manager with another five firms as co-managers. First Southwest Co. and Moody Reid Financial Advisors are advising the city.
The sale includes a $60 million series of tax-exempt new money, a $34 million taxable new money, a $31 million tax-exempt refunding series of 2006 and 2008 bonds, a $26 million tax-exempt refunding of additional 2008 bonds, and an $182 million tax-exempt refunding of debt issued for Sprint Arena, which will also raise about $7 million for improvements to the venue.
The new money will also fund various infrastructure improvements to lighting, buildings, roads, public safety facilities, parking garages, and fund building demolition. The bonds carry a final maturity of 2040.
Ahead of the sale, Moody's Investors Service affirmed the city's Aa2 general obligation rating and A1 special obligation rating and Standard & Poor's affirmed its AA GO rating and AA-minus special obligation/appropriation backed debt rating. The city, home to 472,770, has $1.5 billion of GO and appropriation-backed/special obligation bonds outstanding.
Both rating agencies assign a stable outlook.
"The stable outlook reflects our view of the city's very strong management and adequate economy," said Standard & Poor's analyst John Kenward. "Kansas City has historically shown strong managerial capacity to consistently maintain reserves at a one- month or better level, along with balanced or positive operations."
The city's finance team promotes its tax base growth over the last decade, status as a regional hub and the state's largest city in an investor presentation.
Deputy finance director Tammy Queen notes the city's diverse revenue stream while acknowledging that the 1% earnings tax is a "primary" revenue source that must be re-authorized by voters every five years.
A supplement was distributed Wednesday notifying investors that the tax passed with a 77% approval rate Tuesday. Under state law, Kansas City and St. Louis voters get to weigh on its renewal every five years. The city's top three revenue sources include the earnings tax, the sales tax, and property tax.
S&P said strong management and budgetary flexibility bolster the city's credit profile with good liquidity and reserve levels and a general fund balance of 9.5% of expenses. A negative is the city's weak debt position with debt service accounting for 13.5% of expenditures. The city is also weighed down by a large pension and other post-employment benefits liability.
The city's four funds range from a 77% to 87% funded status and the city began in 2015 making payments that meet an actuarially required level. After completing pension reforms, the city is now focused on tackling its retiree healthcare liability, according to the investor presentation.