OKCís credit rating leads to stellar bond sale

Published: Thursday, March 29, 2018 By: Brian Brus Source: The Journal Record

Competition was tight for buyers of Oklahoma City’s latest round of general obligation bonds Tuesday, city Finance Director Craig Freeman said.

The city’s history of strong credit ratings and conservative fiscal policies is expected to provide coattails later this year for an unrelated bond issuance used to build the new Omni convention center hotel downtown, he said.

“If you look at the spreads we got, the numbers are really close,” he said. “It was a very successful sale and representative of our triple-A bond rating and the leadership of our city departments.”

City Council members found out at the end of Tuesday morning’s meeting that the sale of nearly $124 million in debt was better than expected. Citigroup Global Markets won the first, tax-exempt bond series at a bid of 3.1659-percent annual interest rate for a total of $82.75 million. The sale attracted 11 potential buyers, with the runner-up bidding 3.1693 percent.

The second bond series sold Tuesday, a taxable bond worth $40.99 million, had 10 bidders. Those bonds sold to Raymond James & Associates for a 3.41-percent interest rate.

City residents authorized the deals in late 2017 when they voted on 13 general obligations bond propositions worth a total of nearly $1 billion. That debt is a normal part of municipal government management to finance improvements in infrastructure such as streets, bridges, traffic control, parks, mass transit, drainage and police facilities. Bonds will be sold piecemeal over the next several years until the full amount is depleted and voters are asked to approve a new bundle. The funds provided through the debt issuance will be paid off by annual ad valorem tax levies at an average of 16 mills.

In an unrelated measure, City Council members approved the sale of up to $106 million in bond debt for the purposes of financing and funding a portion of the cost of the Omni Convention Center Hotel and related improvements near the new Metropolitan Area Projects convention center. Bonds for the hotel will be backed by city sales tax revenue rather than ad valorem taxes. And instead of City Hall issuing the debt, it will be handled by the Economic Development Trust. The final council authorization by this summer will have more information about sale details, Freeman said. The interest rate will probably be a little higher than the GO bonds sold Tuesday.

“On a bond level like that, it’s not going to get the same level of investor risk comfort because of the nature of funding resources,” he said. “Property tax is as stable as you can get, and it’s being used for infrastructure, backed by the full faith and ability of the city.

“When you get to the trust, repayment is based on tax increment district revenues and other sources. It’s going to have to have the moral support of the city to guarantee payment on the bonds,”

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