Hamilton County, Ohio, plans to refinance debt used to fund Paul Brown Stadium, home of the Cincinnati Bengals.

DALLAS - Hamilton County, Ohio expects about $60 million in savings when it refunds sales tax bonds that helped finance two professional sports stadium, freeing up funds to restore a promised property-tax rebate.

The county had repeatedly cut the rebate in order to fund the stadiums.

The county, which includes Cincinnati, plans to enter the market in the coming days with the $322 million transaction to refund a portion of debt issued in 2006.

The original bonds helped fund the construction of Great American Ball Park for baseball's Cincinnati Reds and Paul Brown Stadium for football's Cincinnati Bengals. The county owns the stadiums and leases them to the teams.

The refunding, which additionally frees up debt service reserves, also will aid the county in managing its sales tax fund and bolster debt service coverage.

"The savings are to be used to create financial flexibility in our sales tax fund which supports riverfront stadium operations," said Interim County Administrator Jeff Aluotto.

Moody's assigned the new bonds an A1 rating, a one-notch upgrade from the original bonds' rating. Moody's credits the upgrade to the strength of the sales tax and improving collections, the county's large tax base, and improved debt service coverage following the refunding.

Moody's also affirmed its Aa2 rating on Hamilton County's outstanding general obligation limited tax debt.

S&P Global Ratings affirmed the bonds AA-minus rating and Fitch Ratings affirmed the bonds A-plus rating. All three rating agencies assign a stable outlook.

RBC Capital Markets is the lead underwriter. Fifth Third Securities, Inc., The Huntington Investment Co., PNC Capital Markets LLC, and Siebert Brandford Shank & Co. LLC are co-managers.  Calfee, Halter & Griswold LLP is the bond counsel.

The bonds are secured by a pledge for the receipts of the county's additional half-cent sales tax, which Hamilton County voters approved in 1996. As part of its campaign, the county promised an annual property tax rebate if the measure passed.

The county pledges all of the 0.5% sales tax revenue to cover the stadium debt and in practice it devotes 30% to finance the annual property tax rollback. The county estimates it will provide $14 million of property tax relief annually, though it has the ability, and has exercised it in past years, to adjust the amount as needed.

The county holds $17.4 million of available cash in its stadium funds as of fiscal 2014, according to Moody's. Following the refunding, the county expects to release the cash held by a trustee for its debt service reserve and replace it with a surety policy.

By freeing cash currently held in the debt service reserve fund and sales tax stabilization fund, accomplished with the current refunding, the county expects to close 2016 with $44.5 million across its sales tax funds, $30 million of which will be dedicated to property tax relief, said Moody's.

After  years of strong growth — an average of 7.6% over the 30-year life of the tax before 2000 — sales tax collections tumbled below the original projected 3% pace to a 0.2% increase between 2000 and 2010.

In March 2012 the county sold its public-safety hospital for $15 million to plug the shortfall in the stadium fund to cover 2012 stadium fund expenses only. The commissioners also voted to take $1.4 million out of the rainy-day fund to cover the payment.

Bondholders however are protected by a legal structure that requires Ohio to deliver all of Hamilton County's sales tax revenue directly to the bond trustee, which then releases the remainder not needed for debt service to the county. The bonds are also structured with a gross-revenue pledge that elevates debt service payments above all other obligations, including operating costs.

The county's sales tax revenues have rebounded over the last five years, increasing on average by 4.6% annually.  Over the past three years alone, pledged sales taxes have increased by an annual average rate of 5.4%, most recently growing 5.2% to $78 million in 2015, according to Moody's.

The county budgeted for 1.0% growth in 2016, but year-to-date collections reflect a 3.8% increase. The county projects 1.5% annual growth thereafter. "The sales tax debt is supported by the county's large and diverse tax base and positive trend in sales tax revenue with improving coverage," said Stratford Shields, managing director at RBC Capital markets.

Stadium operating costs averaged $11.6 million in the five years through fiscal 2014, Moody's said. The 0.5% dedicated sales tax provided $74.1 million of revenue in fiscal 2014, compared to combined debt service, operating costs and school payments of $64.5 million.

Moody's warns that operating costs may rise as the stadiums age.

If sales tax collection were to drop significantly due to a drop in retail sales, there may insufficient funds to cover debt service on the bonds, according to deal documents.

"Although historical and projected sales tax collections and estimates indicate that collections from the additional .5% sales tax are greater than the amount needed to pay debt service on the bonds the County cannot guarantee that sales tax collection will continue at historical levels," the document said.

Moody's said this risk is mitigated by both the healthy general fund reserves as well as reserves held in the stadium funds.

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