San Antonio City Council OKs up to $795 million of debt

City of San Antonio

San Antonio, Texas, will head to the municipal bond market later this month after the city council on Thursday approved the issuance of up to $795 million of debt.

The authorization for as much as $600 million of general obligation bonds consists of $189.5 million to fund capital projects, $100.37 million to refund 2016 bonds for projected present value savings of $3.2 million, as well as a potential tender offer for $280.8 million of outstanding Series 2020 bonds, according to a city staff memo.

Taxable GO bonds of up to $30 million will finance affordable housing, $130 million of tax-exempt and $25 million of taxable combination tax and revenue certificates of obligation, as well as $10 million of tax notes, are earmarked for various city projects and equipment.

The debt will be combined in an issue scheduled to price the week of Aug. 24, San Antonio City Manager Erik Walsh told the council.  He also reported the property tax-backed debt was rated triple-A by Moody's Ratings and S&P Global Ratings, and AA-plus by Fitch Ratings.

Walsh said the rating agencies affirmed "what we're doing in terms of confidence in the city, our management team, our financial practices, our budgeting and strategic planning, our available reserves, as well as our practices, such as monthly monitoring, the quarterly reports to you all, the multi-year budgeting, and the five-year forecasting."

In its rating report, Moody's noted large general fund budget deficits in the city's five-year financial forecast, mainly due to projected revenue softening and growing expenses. 

"However, the sophisticated management team has a long track record of closing budget gaps and budgets will be adopted balanced through revenue increases and expenditure cuts," the report said. 

Mayor Gina Ortiz Jones has cited a $158 million deficit in the upcoming fiscal 2027 budget as part of her push to put the city's $489 million revenue bond-financed contribution for a $1.3 billion arena for the National Basketball Association's San Antonio Spurs on the November ballot.

Opponents of the move, including City Council Member Misty Spears, argue that city voters already voiced their support for the project when a ballot measure to generate up to $311 million from a Bexar County hotel occupancy tax rate hike and continuation of a rental car tax was approved last year. 

San Antonio's upcoming debt sale will be led by Morgan Stanley with Stern Brothers as co-senior manager and Academy Securities, Blaylock Van, Jefferies, Piper Sandler, and Stifel as co-managers. Hilltop Securities and Estrada Hinojosa are co-financial advisors. McCall, Parkhurst & Horton and Escamilla & Poneck are co-bond counsel.