With proceeds tackling homelessness, Los Angeles brings social bonds

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Los Angeles is selling $276 million in “social bonds” as part of a voter-approved general obligation bond issue to fund city programs for homeless people.

The competitive auction for the taxable bonds is Wednesday. The city also plans to refund $35 million in tax-exempt bonds and $10.6 million in taxable bonds from 2009.

City officials decided last month to label the sale as social bonds because the proceeds will go towards programs that aid the homeless. They say the projects meet the criteria for social bonds outlined by the International Capital Market Association.

The city plans to post annual reports on the Municipal Securities Rulemaking Boards’ EMMA website to meet the association’s requirements for tracking bond spending.

The bond sale is the second since voters approved Proposition HHH in November 2016, which authorized $1.2 billion of bonds for homeless programs.

Los Angeles sold $86.7 million last year to provide financing for eight projects creating 615 housing units.

The latest bond proceeds will fund 24 housing projects that will create 1,224 affordable housing units and 13 facilities projects, according to the preliminary official statement. Facilities projects authorized by the bond include homeless shelters, transitional housing, domestic violence shelters and clinics.

The city’s 2018-2019 budget also includes a $53 million increase in general fund spending for homeless programs including $20 million for a program to get homeless encampments off the street faster.

The bonds are rated AA by Kroll Bond Rating Agency, Aa2 by Moody’s Investors Service and AA by S&P Global Ratings.

In a June 12 report, Moody’s said “The stable outlook on the city's long-term ratings reflects our view that the city will continue to operate with fiscal discipline, strengthening its overall financial position while closing the projected general fund budget gap.”

In its report, Kroll stated that it continued to see Los Angeles’ general obligation credit quality as strong.

“KBRA favorably views the City’s track record of balanced operations which together with conservative fund balance and debt management policies serve to support the City’s strong financial position,” the agency stated.

Nixon Peabody is the bond counsel for the sale while Omnicap Group LLC and Public Resources Advisory Group are the municipal advisors.

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Primary bond market Taxable bonds Refunding bonds City of Los Angeles, CA California