NEW ORLEANS – The City of New Orleans successfully sold $65 million in taxable public improvement bonds to improve streets, parks and playgrounds, public libraries and other public buildings.
The sale came on the heels of Standard & Poor’s (S&P) upgrading the City’s credit rating to A- from BBB+ due to economic growth and sound fiscal management by the Landrieu Administration. The credit rating upgrade earned by the City saved taxpayers an estimated $4.2 million in debt service over the life of the bonds. City officials said the credit rating upgrade and the recent selection of Carpenter/Woodward (Four Seasons) to invest more than $360 million to redevelop 2 Canal Place are clear signs that New Orleans is seeing tremendous economic growth.
“This week’s successful bond sale and the Four Seasons redevelopment project of 2 Canal Place are strong, positive signs that New Orleans is on the right track,” said Mayor Mitch Landrieu. “By restructuring, rebuilding and reviving the City’s finances, we are taking full advantage of our improved credit rating and economic growth. This bond sale will allow us to fix more streets and improve more City facilities like playgrounds and libraries while saving our taxpayers money in the future. We are committed to not just rebuilding our city, but building it back stronger and more resilient.”
The sale is the fifth and final phase of the City’s general-obligation bonds authorized by voters in 2004 as part of an overall $260 million bond program. The bonds were sold via a competitive sale and received bids with True Interest Costs (TIC) ranging from a high of 4.615% to the winning bid of 4.217%. The bonds attracted favorable attention from the marketplace after receiving ratings of A3, (Stable)/A-, (Positive)/A- (Stable), by Moody’s, Standard and Poor’s (S&P), and Fitch Rating, respectively. The S&P rating reflects an upgrade to A- from BBB+. It is estimated that the improvement to the rating for the City could result in an estimated $140,000 of annual debt service savings or an average of 30bp in yield. New Orleans taxpayers will save an estimated $4.2 million in debt service over the life of the bond.
Mayor Landrieu added, “When we took office about five years ago, our administration faced a $97 million budget gap and we immediately got to work turning deficits into surpluses. We cut government spending, reformed contracting and procurement processes and followed strict budgets. The nation has taken notice and the city is reaping the rewards of this sound fiscal management. Our improved market is creating thousands of new jobs and attracting national retailers. Just this week, we selected a preferred developer to transform the underutilized 2 Canal Street into a Four Seasons. Our work isn’t done, and we will continue to make substantive, fiscally responsible reforms to improve the City’s finances that help grow our economy so that it benefits everyone.”
The $65 million bond sale will finance a total of 46 projects including $42.5 million to repair streets, $7.5 million to improve NORDC facilities, $2.7 million to upgrade NOPD and NOFD first responder stations, over $1.6 million for the New Orleans Public Library and other improvement projects.
The bonds are general obligations of the City and are payable from a special ad valorem tax, unlimited as to rate and amount, levied by the City on all property subject to taxation within the city. The bonds are secured by a pledge of the full faith and credit of the City. The City Council is required under the Constitution and laws of Louisiana to impose and collect annually, in excess of all other taxes, a tax, on all property subject to taxation within the City sufficient to pay the principal of and interest and redemption premiums, if any, on all of the City’s general obligation bonds in each year. This special tax, when collected, is immediately segregated and paid over to the Board of Liquidation to be used for the payment of debt service on the bonds.
“The success of this week’s bond sale is a validation of our hard work to not only stabilize the City’s financial position but put us on path towards prosperity,” said First Deputy Mayor and Chief Administrative Officer Andy Kopplin. “Through meticulous planning, shared sacrifice and strong leadership we faced down budget deficits and furloughs and today we are building for our future. Combined with our federally-funded recovery budget, we can now put these bond funds to work to repair streets and improve facilities across the city. By improving the City’s credit rating, we’re also securing lower interest rates that will save residents money.”
Councilmember-at-Large Stacy Head said, “As City Councilmembers, we hear daily from citizens that road and street light repairs are long overdue, that our neighborhood playgrounds, community centers and swimming pools need repairs, and that our first responders deserve modern facilities equipped with the tools they need to successfully serve and protect our communities. This successful bond sale will enable the City to get to work making these repairs a reality.”
District C Councilmember Nadine Ramsey said, “Today is a great day for the City of New Orleans. This bond sale will provide much needed support to our infrastructure. The funds generated go toward improving roads, repairing streetlights, as well as enhancing our NORDC playgrounds and libraries. The citizens of New Orleans deserve a great quality of life and this brings us closer to that goal.”
District D Councilmember Jared Brossett said, “It is vital that we follow through on plans and opportunities to improve and fix our broken infrastructure. We need to get these bonds issued and put this money on streets as soon as possible.”
District E Councilmember James A. Gray, II said, “The success of this bond sale is further evidence that the City of New Orleans is on the move, and the rest of the country realizes that fact. We should all quickly get on board.”
CITY’S IMPROVED CREDIT RATING
Earlier this month, Standard and Poor’s (S&P) Rating Services upgraded its long-term and underlying rating to ‘A-’ from ‘BBB+’ on the City of New Orleans’ general-obligation debt and issued a positive outlook for all ratings. This was the second S&P rating upgrade for the City of New Orleans since Mitch Landrieu became mayor in 2010 – the first upgrade occurred in 2013 to ‘BBB+’ from ‘BBB’ – and the new rating exceeds the City’s general-obligation credit rating it had prior to Hurricane Katrina.
S&P issued its credit upgrade based on the City’s “improved budgetary flexibility and liquidity in fiscal 2013 coupled with ongoing commercial and residential development, which are expanding the city’s property and sales tax bases. The positive outlook reflects our view of the growth New Orleans' tax base and economy coupled with significantly improved budgetary flexibility."
Both Moody’s and Fitch Ratings also recently revised their outlooks for the City of New Orleans to stable from negative. All three credit rating agencies have cited the City’s expanding economic base and sound fiscal management for the improved ratings and outlooks and suggested additional rating upgrades are possible if current trends continue.
