CHICAGO — The Detroit-Wayne County Stadium Authority next week will offer $61 million of refunding bonds issued for Comerica Park, home of Major League Baseball’s Detroit Tigers.
Proceeds will be used to refund bonds originally issued in 1997 for interest-rate savings, estimated at around 4% to 5% net present-value savings, county officials said.
The authority currently pays interest rates ranging from 3.7% to 5.5% on the bonds, which feature a final maturity of 2027.
The bonds are payable from hotel and motor vehicle taxes and feature a limited-tax general obligation pledge from Wayne County.
The stadium authority, which operates Comerica Park and Ford Field, where the National Football League’s Detroit Lions play, issued $85.8 million of revenue bonds in 1997 to finance construction of Comerica Park. Next week’s issue will refund all of the remaining debt.
The debt carries low investment-grade ratings from all three major rating agencies, which based their review largely on the county’s fragile financial position. Moody’s Investors Service rates the bonds Baa2, and Fitch Ratings and Standard & Poor’s rate them BBB-plus.
Michigan’s most populous county, Wayne faces ongoing fiscal stress tied to a weak economy and other challenges, including growing retirement costs. It was hit with two downgrades last December from Fitch and Moody’s, which lowered its rating two notches to Baa2 from A3.
In July, the county saw more negative ratings action when Moody’s revised its outlook to negative from stable, citing persistent fiscal stress and slim operating margins.
Fitch, ahead of next week’s sale, shifted its outlook to negative amid concerns over the county’s ability to reduce its deficit over the near term.
Carla Sledge, Wayne County’s chief financial officer, said the tourist-tax revenues that pay debt service have always been sufficient. The rating agencies “mostly looked at the county’s situation rather than the revenue that was going to be needed to take care of the debt service, which I though unfortunate,” she said.
Debt service on the bonds is paid from a 1% hotel tax and 2% rental car tax. Coverage levels totaled 1.15 times in 2011, up from 1.07 times in 2010 and 1.08 times in 2009, according to preliminary bond documents.
The taxes brought in $7.1 million in 2011, with debt-service payments totaling $6.1 million. “We’ve never had to come back to the county,” said Sledge, referring to the county’s limited-tax GO pledge that provides the bonds’ ultimate security.
Credit analysts say the county’s fiscal position has weakened over the past few years, but noted that it has made some significant strides toward stabilization.
“The county has been out there since at least 2005 making all kinds of reductions when it comes to the expense side of the general fund,” Sledge said. “We’re even looking at the revenue side.”
The county’s current deficit-elimination plan relies on tapping $58 million of unspent state grant dollars that are typically restricted to offset its $189 million accumulated deficit. The state needs to approve the move.
On the plus side, Wayne enjoys a sizable tax base, a moderate debt burden, and last year resolved a difficult budget conflict with the Third Circuit Court, a resolution viewed positively by rating agencies.
Wayne has $308.2 million of limited-tax GO debt, as well as $240 million of bonds issued by the Wayne County Building Authority and the outstanding stadium bonds. It has no unlimited-tax GO debt.
A chunk of the 1997 stadium bonds with a 2027 maturity and 5.25% coupon were yielding 5.39% in recent trading, according to the Municipal Securities Rulemaking Board website. Bonds with a 2017 maturity and 5.5% coupon yielded 5.6% in mid-August trading.