DALLAS -- Little Rock, Ark., will fund street and drainage improvements with proceeds from next week’s negotiated sale of $58.4 million of general obligation bonds supported a 15-year property tax extension approved last year by voters.
The sale is set for June 18.
The two-part ordinance approved at a special election in September 2012 allocates 70% of the tax revenues to support bonds for street work, and 30% for debt to fund drainage efforts. Proceeds from the pending bond sale, along with $2.2 million of expected premiums, will provide $42 million for street projects and $18 million for drainage work.
The city expects to exhaust the authorization from the tax extension with a $44.5 million bond issue in 2016.
Although the debt is being issued with a 20-year amortization schedule, Little Rock officials expect to pay off the bonds off as early as 2024.
A mandatory early redemption feature requires the city to use all collections in excess of annual debt service to redeem outstanding bonds. Revenue from the 3-mill tax is dedicated to debt service on the capital improvement bonds.
The schedule in the preliminary official statement provides principal retirements of $5.4 million in fiscal 2014, $4.2 million in 2015, and $3.6 million in 2016, tapering to $2 million in 2017.
Early retirements from the mandatory redemption provision include $3.5 million of principal in 2014, $5.1 million in 2015, and $5.2 million in 2016, before dropping to $1.9 million in 2017.
The tax is expected to generate $10.6 million a year, with maximum annual debt service estimated at $6.5 million.
The limited tax capital improvement bonds are rated AA by Standard & Poor’s and Aa2 by Moody’s Investors Service.
Stephens Inc. is the senior underwriter for the sale. Co-managers include Crews & Associates, Loop Capital Markets, and Raymond James.
Friday, Eldredge & Clark LLP is the city’s bond counsel.
The capital improvement tax property tax was first approved by voters in 1958 and renewed in 1976, 1987, 1994, 2003, and again last year. The tax rate fell to 3 mills from 3.3 mills on Jan. 1.
The extension was decided at a special election because a November vote would be past the deadline for the tax bills that went out earlier this year.
Little Rock Mayor Mark Stodola urged the extension of the capital improvements tax in March 2012. Voters had approved a 1% sales tax in 2011 to provide $200 million for street and drainage projects over 10 years, but Stodola said the city had a backlog of needed street and sidewalk projects totaling more than $700 million.
Little Rock has $66.2 million of outstanding GO bonds and $351.4 million of outstanding revenue debt.