DALLAS — San Antonio will close on $233 million of new money, refunding bonds and notes next week after the top-rated debt met strong demand from institutional investors.
The bonds and notes were oversubscribed three times, drawing a true interest cost of 2.83%, said Marion Gee, assistant finance director for the city.
The city refinanced $72.5 million in existing bonds and certificates of obligation at a 1.68% interest rate, saving more than $6.7 million, or 9.96%. The bonds reach final maturity in 2034.
"Anytime you get a savings of that magnitude, you have to be pleased," Gee said.
The city also issued new bonds that will fund projects in the voter-approved 2012 bond program, as well as street improvements and land acquisition, at interest rates of 3.08% and 1.26%, respectively.
With triple-A ratings from Standard & Poor's, Moody's Investors Service and Fitch Ratings, San Antonio is able to keep its borrowing costs low, which means more money goes toward projects, said city manager Sheryl Sculley.
"For any citizen who has heard about the city's AAA bond rating and wondered why it matters, it doesn't get any clearer than this," Sculley said in a prepared statement. "By keeping our financial house in order, we are able to borrow at much lower interest rates, which translates into lower total costs for the streets, drainage, libraries, parks and other projects that the community wants."
The debt priced July 29 through negotiation with senior managers Piper Jaffray & Co. and Stifel, Nicolaus & Co. Coastal Securities and Estrada Hinojosa & Co. were financial advisors, with Fulbright & Jaworski and Kassahn & Ortiz as co-bond counsel.
The deal closes on Aug. 20.
Ratings analysts cited San Antonio's strong fiscal performance and the financial management policies in conferring the top ratings. In May, the City Council supported staff's recommendations to increase the general fund financial reserves and ending fund balance, establish financial targets, and manage growing public safety expenses so that other priorities such as street maintenance, libraries, parks, code enforcement, human services and animal care are not crowded out.
"It takes financial discipline and often difficult decision-making to maintain a AAA bond rating," said Mayor Ivy Taylor. "But these are the rewards we reap: low interest rates and millions of dollars in savings that can be used to invest in future projects to improve our community."
On Aug. 7, Sculley proposed a $2.4 billion budget for fiscal year 2015.
The proposed budget includes an additional $15 million for street maintenance and nearly $7 million more for drainage improvements.
Sculley's budget also exercises a provision in the collective bargaining agreement with uniformed city employees that would make changes to their health care benefits.
The city's proposed general fund budget, which covers expenses for a number of departments and operations, including libraries, economic development and human services, is $1.05 billion, a 5.9% increase over the fiscal year 2014 budget.
