DALLAS — League City plans to issue $38.5 million of waterworks and sewer system revenue bonds next week for further expansion of its utility system to meet the needs of a growing population.
RBC Capital Markets is lead manager for the negotiated sale with Morgan Keegan & Co. and Coastal Securities Inc. as co-managers.
First Southwest Co. is the financial adviser to the Texas Gulf Coast city of nearly 70,000. Fulbright & Jaworski LLP is bond counsel.
The bonds, which won’t be insured, are structured as serials maturing in 2013 through 2034.
“We evaluated the difference in bond insurance against our rating of double-A and saw that we’ll pick up about $30,000 without it, so we will not go with insurance on the bonds,” finance director Terry Knudsen said.
Standard & Poor’s assigned a AA to the sale, reflecting the city’s “good debt service coverage, sound financial operations, diverse customer base and strong liquidity.”
Moody’s Investors Service assigned its A1 rating and affirmed the rating on about $40.6 million in waterworks and sewer system revenue debt outstanding.
Analysts said League City has benefited from inclusion within the Houston metropolitan area’s residential and commercial expansion. The city is about 20 miles southeast of downtown, close to NASA’s Johnson Space Center and the Galveston Bay shipping channel.
League City’s current population is up 54% from the start of the decade. Its fiscal 2008 taxable-assessed value of $4.4 billion is an increase of almost 60% from five years earlier.
Only half of the city is currently developed so “substantial land remains available to absorb growth,” according to analysts. Officials expect continued growth as several new master-planned, more-expensive residential communities near completion. Projections show the city reaching a build-out population of 155,000 residents by 2035.
The utility served 25,762 water accounts and 24,290 sewer accounts in fiscal 2008, according to analysts. Moody’s said the system’s 2008 revenue provided a strong 5.71 times debt service coverage of parity revenue bonds, including impact fees.
Most of the proceeds from the Series 2009 bonds, roughly $24 million, will fund construction of a new wastewater-treatment facility “from the ground up,” Knudsen said.
He also said the city’s population growth has slowed somewhat of late, but still outpaces the rest of the country.
“We’re certainly not seeing the level of growth that we were in ’05 through ’07, but we’re not seeing what many parts of the country are and that is a downturn because of the current economic environment,” Knudsen said. “We’re still building houses and our retail is as strong as ever.”
Officials plan to bring another $23 million of revenue bonds to market before the end of next year.
