CHICAGO — The Toledo-Lucas County Port Authority plans to issue $14.4 million of bonds to finance a takeover of Toledo’s parking system in a deal that gained final City Council approval last week.
The Port Authority will purchase three downtown parking garages and take over management of the city’s 965 parking meters for 25 years.
Toledo is selling the asset for an up-front cash payment that officials hope will help stabilize its fiscal position and erase a general fund deficit. It will be the largest asset sale by the city so far. In July, the city sold a 69-acre marina district and a nearby land to a Chinese company for $3.8 million dollars.
Officials plan to defease $4.7 million of bonds issued in 1999 to finance one of the garages as part of the transaction.
“Toledo has been in the process of divesting themselves of assets,” Thomas Winston, the port’s chief financial officer, said in an interview. “We think this is a win-win for the city, who reached out to us and wanted to divest itself of assets for several reasons, including cash flow to better manage their operations budget, and we think the downtown parking garages are a key asset in downtown Toledo.”
The Port Authority plans to issue the bonds in early December in order to close the deal by Dec. 21, Winston said. The borrowing will consist of two tranches. The Ohio Department of Transportation will sell a $9.3 million series of 20-year tax-exempt bonds through its infrastructure bank program, and the port will sell a $4.9 million series of 15-year debt through its Northwest Ohio Bond Fund program.
Robert W. Baird & Co. will be the underwriter on the Port Authority sale. Stifel, Nicolaus & Co. will be the underwriter on the ODOT bonds. Bricker & Eckler LLP is bond counsel on both transactions. DiPerna Economic Development Advisors is ODOT’s financial advisor.
The finance team expects to meet with rating agencies in two weeks, said Michael Burns, vice president at Baird.
The Port Authority will give Toledo $12.4 million in an up-front payment. For the first 15 years, the city will continue to get 50% of all parking revenue after debt service payments are made and various accounts are funded. After 15 years, when the agency’s bonds are paid off, the city’s take will rise to 70%.
The authority plans to use some of the proceeds for capital improvements, including adding the ability to pay parking costs with credit cards, as well as to finance various reserve funds.
All debt will be payable from parking revenues, expected to total $2 million annually for the first few years. The bonds will feature additional back-up pledges from a mortgage on the garages and various reserve funds that are part of both the state and the authority’s bond programs.
Debt service coverage is tentatively projected to be 1.58 times for both bond issues, Burns said.