LOS ANGELES — The governments of Los Angeles plan to issue $5.5 billion in debt over the next year.
"It is hard to imagine another city's agencies issuing this much other than the state," Los Angeles City Administrative Officer Miguel Santana said Thursday during his closing speech to Los Angeles 2nd Regional Investor's Conference.
The volume of bond issuance coming out of the city is indicative of what you would expect for the 12th largest economy in the world - if Los Angeles were a country, Santana said.
"Investments are being made in infrastructure and our workforce," Santana said.
Some of those investments — not only from the city and its enterprises but also Los Angeles County and the Los Angeles Unified School District, will result in that $5.5 billion debt total.
One theme that emerged from issuers at the two-day conference were that they are working on controlling labor costs from the perspective of wages and pension liabilities.
"It is unsurprising that over the last four years, you have seen headlines pertaining to labor issues and you will continue to see that in the future," Santana said.
The lesson learned from working through the city's financial turmoil following the Great Recession was "don't go back to government that is unsustainable," Santana said.
"I often tell the mayor that the best pension reform we have is to insure that the city's workforce is at a sustainable level and only give raises we can maintain into the future," he said.
Elected officials are making decisions today that would have seemed improbable a decade ago, he said.
The city continues to enjoy fairly highly-funded pension ratios compared to other states. All of the city's pensions are above 70% funded, he said.
He ticked off trends bolstering city coffers: rising property taxes, increasing sales tax, increasing trade and population growth.
The city will use those arguments to bolster its coming issuance plans, starting in March with $161 million in Municipal Improvement Corporation of Los Angeles (MICLA) bonds.
In April, L.A. will issue $18 million in landscaping and lighting district refunding bonds, and in June it will price its annual $1.3 billion tax and revenue anticipation notes. In August, it will price $60.5 million in new money general obligation bonds and a $50 million GO refunding.
Los Angeles County plans to issue $900 million in tax and revenue anticipation notes and $30 million in lease revenue bonds in June. The county will issue $300 million in lease revenue bonds in October. The county also plans another $100 million refunding in November through a program it created to act as a conduit for successor agencies to the former redevelopment agencies in the region.
Mark Saladino, the county's treasurer and tax collector, called the county's general fund debt portfolio extraordinary, because annual debt service is only 1.3% of revenues and debt is only $136 per person per capita.
The Los Angeles Department of Water and Power plans to issue around $900 million in revenue bonds for its power system by May. The first $325 million will be issued through the Southern California Public Power Authority.
LADWP, which has $11.1 billion in outstanding debt combined for its water and power system, is underway on a $8.9 billion capital improvement program.
Los Angeles World Airports, in the midst of a $7.3 billion capital program, has $4 billion in outstanding debt.
It completed the roughly $4 billion construction of its Tom Bradley International terminal in September that enables the airport to accommodate the Airbus A380, the world's largest passenger airplane, at multiple gates simultaneously, according to Ryan Yakubik, LAWA's chief financial officer.
The airport anticipates spending an additional $3.8 billion for projects anticipated to be completed by fiscal 2019, Yakubik said. LAWA plans to price $300 million in revenue bonds in August and another $300 million in February 2015.
The Port of Los Angeles, one of the region's biggest economic drivers, has postponed a planned bond issuance for several months mainly because it has been able to support its $1.5 billion in capital improvement projects currently underway using cash flow, said Karl Pan, the port's chief financial officer.
The port has been spending roughly $15 million a month to support ongoing projects, he said.
Pan said he does expect to head to the markets to price $200 million to $300 million in May.
Los Angeles Unified School District, the nation's second largest school district, has been in the spotlight for plans to spend $1 billion providing all of its roughly 600,000 students with iPads and upgrade the school's wireless networks - and use bonds to do it.
The district has slowed the program and plans to review the program before moving forward.
Short-term GO bonds would finance the tablets, while longer-term bonds would be used to finance IT infrastructure needs, in accordance with useful life constraints, said Tim Rosnick, deputy controller of LAUSD.
The district is looking at a potential GO refunding in the $500 million to $600 million range in April or May, Rosnick said.
The school district has been a major bond issuer as a result of a $19.5 billion new construction and modernization program but hasn't issued new bonds for the past few years.
LAUSD, which carries an Aa2/AA rating with a stable outlook, takes "its ratings seriously even when it doesn't anticipate issuing and keeps the rating agencies posted," Rosnick said.
Voters have approved $20.6 billion in five separate GO bond authorizations for LAUSD since 1997.
Of that amount, $12.9 billion has been issued, and $3.67 billion has been refunded for savings. Over the next 10 to 15 years, the district plans to issue up to $7.7 billion of new money GO bonds. LAUSD has $11 billion in outstanding debt.
Los Angeles County Metropolitan Transportation Authority has $241 billion in projects planned through 2040.
It has three tax-approved measures to support projects. Measure R passed in 2008 is expected to generate $34.5 billion over its 30-year life that expires in 2029, according to Donna Mills, Metro's treasurer.
"We continue to seek alternative sources in addition to leveraging Measure R money with TIFIA loans," Mills said.
Last week, Metro closed on a $160 million federal Transportation Infrastructure Finance Innovation Act loan for the regional connector. It also anticipates closing on a TIFIA loan for its Westside subway project this year.
Metro has $3.6 billion in long and short-term debt, but that figure does not include TIFIA loans. The transportation authority has been able to reduce its long-term variable rate debt to $383 million.
Metro plans to price $150 million in refundings in two series, but dates have not been determined.