New York State conduit fast tracked borrowings ahead of tax bill

When the future of tax-exempt bonds for nonprofits was in limbo amid congressional tax negotiations, one of the nation's largest municipal bond issuers unleashed a preemptive volley of end-of-year transactions.

The Dormitory Authority of the State of New York authorized $115 million in bonds for St. John’s University and St. Joseph’s Hospital in Yonkers on Dec. 13 to conclude a series of weekly meetings starting on Nov. 8 in which it approved $800 million in year-end debt sales for higher education and healthcare clients.

DASNY also set up transactions planned by the end of December for Memorial Sloan Kettering Cancer Center, Fordham University, United Cerebral Palsy Jawonio, Touro College and Bronx Lebanon Hospital before it knew that the final tax legislation agreement would preserve tax-exemption for private activity bonds.

Gerrard P. Bushell, DASNY president and CEO, said fast tracking deals in late 2017 was important because eliminating PABs would have driven up borrowing costs for nonprofit entities that would have been forced to issue taxable bonds.

“DASNY has been working hand in hand with our health and higher education partners to help them meet their financing needs as the ability of these nonprofit institutions to issue low-cost, tax-exempt private activity bonds has been in question,” said Bushell. “Preserving the tax exemption for these organizations is crucial for them to retain their ability to create the infrastructure that drives our economy.”

Bushell noted that DASNY has helped deliver around $10 billion in low-cost financing for 75 healthcare and higher education institutions throughout New York State since 2011. In addition to proactively planning year-end deals because of uncertainty with the PAB exemption, DASNY’s board of trustees also authorized staff on Dec. 13 to begin preparation for up to $2.275 billion in borrowings in 2018 on behalf of Cornell University, Hospital for Special Surgery, Montefiore Medical Center and Maimonides Medical Center. DASNY is on track to issue approximately $7.7 billion in calendar year 2017.

DASNY overhauled its borrowing process two years ago shortly after Bushell was appointed by Gov. Andrew Cuomo to enable borrowers with at least an A rating the ability to move to the market faster and reduced scenarios where debt-service reserves are required. The conduit giant finished the first half of 2017 as the second largest issuer in the nation with $3.5 billion bonds sold, according to Thomson Reuters data. The agency was founded in 1944 and had an outstanding bond portfolio of roughly $47.9 billion as of June 30.