The city of Los Angeles is set to offer $1.46 billion of tax and revenue anticipation notes on Tuesday, in what will be the largest TRAN deal in the U.S. this year.
Proceeds of the sale will be used to make a $618 million prepayment to its fire and police pension plans and a $458 million prepayment on the city employees' retirement system; the city will save almost $37 million by paying early. Additionally, $400 million will go to the cash flow fund.
Since 2012, the city has seen a slow but steady economic recovery as it has experienced employment growth, a rise in home sales and prices, and an increase in residential permits and non-resident permit values.
Miguel Santana, Los Angeles' City Administrative Officer, said the city has met its financial goals for the current fiscal year.
The Fiscal Year 2016-17 budget "demonstrates fiscal discipline," the city said, while allowing it to make key service investments.
Los Angeles has appropriated 1.6% of its General Fund for capital improvements, which exceeds its target of 1%. It has also exceeded its 5% Reserve Fund target, coming in at 6.01%.
It has also increased its Budget Stabilization Fund to $94 million while at the same directing $138.9 million into the fight against homelessness.
The city also is actively addressing liabilities and is on track to eliminate its structural deficit by Fiscal Years 2020-21.
"The city has made steady progress in strengthening its financial standing," Santana said, "and is moving forward on eliminating the structural deficit."
Los Angeles is likely to get good rates on the deal next week, with both long- and shorter-term muni rates hovering at near record lows.
Senior manager on the tax-exempt negotiated deal is Esther Berg of Morgan Stanley and the financial advisor is Douglas Montague of Montague DeRose.
The TRANs are rated MIG1 by Moody's Investors Service SP1-plus by S&P Global Ratings and F1-plus by Fitch Ratings.