A Utah debt issuer will debut in the municipal bond market this week with a $900 million sales tax revenue bond issue to finance renovations to a professional sports arena and infrastructure improvements in downtown Salt Lake City.
The Downtown Revitalization Public Infrastructure District will sell the bonds, which are exempt from federal and Utah income taxes, in a deal priced by senior manager Goldman Sachs and co-manager D.A. Davidson & Co.
The majority of bond proceeds are earmarked for Delta Center, which is owned by Smith Entertainment Group since it acquired the National Basketball Association's Utah Jazz in 2020 and last year became the home of the
The deal was made possible by
The city council in October approved a 0.5% rate hike, which took effect Jan. 1 and excludes groceries and other purchases such as cars and boats. The increase was projected to generate $1.2 billion over 30 years.
An
The city council created the 10-acre public infrastructure district on April 8 and appointed a five-member board of trustees, which authorized the debt issuance on April 17.
Series A first lien revenue bonds totaling $651.26 million and Series B second lien bonds totaling $217.73 million are structured with serial maturities between 2026 and 2045 and term bonds due in 2050 and 2055, according to the deal's preliminary official statement. The $31 million of unrated Series C subordinate lien bonds have a sole term maturity in 2035.
Bonds in the deal should price and trade cheaper than comparably rated sales tax revenue bonds, according to Pat Luby, senior municipal strategist at CreditSights.
"In downside scenarios, such as a move of either of the professional sports franchises out of Salt Lake City, there could be challenges in replacing them as a draw to attract people into the downtown area (along with their incremental spending)," he said in an email.
The first lien bonds are rated A1 by Moody's Ratings, which cited "the broad nature of the pledged revenue, a 0.5% sales and use tax levied on nearly all of Salt Lake City," as well as a "credit positive" closed lien.
"The credit strength of Salt Lake City (Aaa stable) is further incorporated in the rating through our view of the city as the parent entity given its involvement as the authorizer of the tax and the party pledging the revenues," the rating report said. "This is balanced by our assessment of low likelihood of the city to financially support the debt beyond the pledged revenue."
Moody's is the only agency rating the bonds, according to the POS.
The report noted that a Salt Lake City rating downgrade or maximum annual debt service coverage falling below 1.1 times could lead to a downgrade.
The rating also incorporates "solid debt service coverage," which based on similar 0.5% sales collections in fiscal 2024 would equate to roughly 1.36 times coverage for first-year debt service and 1.15 times maximum annual debt service, according to Moody's.
Revenue from Salt Lake City's 0.5% correctional facility sale tax has grown 8.58% between 2020 and 2024, according to the deal's investor presentation.
Moody's rated Series B second lien bonds, which benefit from a debt service reserve fund unlike the first lien bonds, A3. Both ratings have a stable outlook, reflecting expectations "that pledged revenue collections will exhibit long-term growth and provide sound coverage, supported by the broad sales tax pledge and the strength of the Salt Lake City economy," Moody's said.
The lack of additional new money bonds is potentially a long-term credit positive, "but it also means that institutional investors that buy bonds will want to have enough of a position in order to justify the expense of adding a new credit to their research surveillance," Luby said.
Howard Cure, director of municipal bond research at Evercore Wealth Management, said the closed liens could be a problem if there is insufficient funding to cover all of the improvements.
"The question is: is the $900 million enough to make sure all the improvements are done, and what happens if there's a shortfall?" he said.
The Delta Center's bond-financed remodeling, which commenced in April, will make it a state-of-the art dual hockey and basketball arena, according to the investor presentation.
Under the temporary name of Utah Hockey Club, the team played its inaugural season at the arena in 2024-25. The center, which opened in 1991,
The arena was designed for basketball, with its 94-foot-long court. There are fewer seats for hockey games and many views of the 200-foot-long playing surface are obstructed.
The arena project's completion is expected by fall 2027 with district improvements beginning that year, according to the POS. Salt Lake City will host the Winter Olympics in 2034.
Professional hockey came to Utah via the Arizona Coyotes and a trail of actual and proposed bond issuances. After
Bond and disclosure counsel for the upcoming bond sale is Gilmore & Bell, with Kutak Rock as underwriter's counsel. Zions Public Finance is the municipal advisor.
