CHICAGO – Milwaukee takes competitive bids Thursday on about $270 million of revenue notes and general obligation bonds to manage cash flow and fund capital projects.
The city is selling about $130 million of tax-exempt general obligation notes and bonds, which includes $38 million of refunding debt. The deal includes another $18 million in taxable GOs. Also being sold are $120 million of revenue anticipation notes due in December to cover the city’s cash flow needs as it awaits its state shared revenue aid payment in November.
The bonds will fund “general municipal projects, streets, and tax-increment financing” said Richard Li, debt specialist in Comptroller Martin Matson’s office, which manages city debt issuance. The city is requiring that each maturity not be reoffered at less than par.
Katten Muchin Rosenman LLP and Hurtado Zimmerman SC are co-bond counsel. Public Financial Management Inc. is advising the city.
The city’s public debt commission is accepting submissions from legal firms interested in serving as bond counsel or disclosure counsel on future city general obligation, revenue anticipation note, and revenue-backed bond deals. Proposals are due May 16.
Winners would serve for a three-year term with the possibility of the city extending the term two additional years. The latest competitive selection process marks the first time the city is hiring a separate disclosure counsel to work on offering statements. Li said the additional role should help local firms interested in vying for city work.
Ahead of the sale, Fitch Ratings and S&P Global Ratings affirmed the city’s AA ratings and stable outlooks.
The rating reflects “the city's stable financial performance over time, exceptionally strong gap-closing capacity and moderate long-term liabilities. A demonstrated capacity to cut spending, low expected revenue volatility and sufficient financial cushion offset Fitch Ratings’ expectation for limited revenue growth,” Fitch said.
“The stable outlook reflects our view of the city's economy and our anticipation that the city will maintain strong budgetary flexibility, very strong liquidity, and, at least, adequate budgetary performance,” S&P said.
State shared revenue payments account for about 40% of the city’s general fund revenues, “making its finances somewhat vulnerable to the state's fiscal condition,” said Fitch, which assigns its AA rating to Wisconsin’s GOs. Property taxes are next biggest source, accounting for 30% of general fund revenues.
Over the next two years, the city expects to issue an additional $110 million of GO debt and about $70 million in new pension bond debt. The city previously issued $62 million in pension debt in 2013 that matures in 2018.
The city's employees are covered by the Employees' Retirement System, which was 97.8% funded as of Dec. 31, 2014, with a net pension liability of $94 million. Milwaukee's combined pension and OPEB contributions totaled $90.1 million in 2015, S&P said.