Stamford, Conn., plans to competitively market $35 million of bonds next week and take advantage of federal bond programs due to expire at the end of the year.
The deal is structured with $9 million of tax-exempts with maturities from one to three years, $21.6 million of taxable Build America Bonds with maturities from six to 11 years, and $4.4 million of taxable recovery zone economic development bonds with maturities of 18 and 19 years.
“We considered last week, with all the volatility, either postponing or issuing short-term [bond anticipation notes],” said Barry Bernabe, vice president at Webster Bank NA, the city’s financial adviser. “After the last couple of days and because of feedback we’ve gotten from various underwriters, the city decided to stay the course and go ahead with the deal.”
The expiration of the RZEDB program, which provides the issuer a 45% interest subsidy, and the seemingly remote possibility that it will be extended, was also a factor.
“Stamford did not just want to leave that on the table,” Bernabe said.
The bonds will use up the city’s full RZEDB allocation.
The city typically sells new-money bonds once a year. Since 2001, it has sold $391.4 million of bonds in eight deals, according to Thomson Reuters.
The city had initially planned to go to market in the summer, but had sufficient cash flow to delay the deal. It also planned to refund $20 million of bonds over the past few weeks but that deal has gone to day-to-day status because market volatility pushed net present-value savings to just below the city’s required 2% minimum, Bernabe said.
Rates have spiked in recent weeks, in part due to a glut of end-of-the-year issuance. Municipal Market Data’s benchmark for triple-A 20-year bonds was 4.03% on Monday, compared to 3.48% on Nov. 1.
Frederick Flynn Jr., Stamford’s director of administration, said the city could benefit from a flight to quality in the midst of market volatility.
Moody’s Investors Service rates the bonds Aa1 with a stable outlook. Moody’s in March downgraded the city from Aaa and gave it a negative outlook, citing slim reserves in a weakened economic climate. Moody’s revised the outlook to stable in October.
Standard & Poor’s rates the city’s outstanding bonds AAA with a stable outlook.
Stamford is an affluent city roughly 35 miles northeast of Midtown Manhattan. Median household income in the city of 119,928 was $77,598, compared to the national median of $52,175, according to 2008 U.S. Census estimates.
The city has $374.4 million of debt outstanding, according to the preliminary official statement.