City sells $465 million in bonds to fund contribution to new ballpark
The city's obligation of the ballpark debt will be repaid with revenue generated by three existing venue taxes
The City of Arlington completed its contribution to the funding of the new Globe Life Field Wednesday with the sale of $465.4 million in bonds from 87 investors.
The city’s payment is fully underwritten at $500 million, with the receipt of premiums from the tax-exempt bonds. Arlington’s portion was capped at that half-billion-dollar amount last August.
At that same time, the Rangers secured a loan for its contribution to the project. The Rangers’ lease on the $1.1 billion retractable-roof ballpark, set to open in 2020, runs through 2054.
"Our partnership with the City of Arlington has always been great," Texas Rangers executive vice president of Business Operations Rob Matwick said. "We're very excited. This keeps the process moving forward. It's a very important piece of the process.
"The city has lived up to everything it said it would do, and we're trying to do our part. Everything is on schedule."
In all, the 87 investors contributed a total of $1.9 billion in orders for bonds, more than four times the amount of the available bonds to sell.
City officials indicated it is symbolic of the confidence in the City’s credit and history of successfully funding and managing these forms of public-private projects.
Because of the high demand, the interest rate was lowered by as many as 10 basis points on some of the maturities.
Arlington’s portion of the ballpark debt will be repaid with revenue generated by three existing venue taxes – a half-cent sales tax, a 2 percent hotel occupancy tax and a 5 percent vehicle rental tax, along with the $2 million a year in rent for the ballpark paid by the Rangers.
The venue taxes are also being used to pay down the City’s remaining obligation on AT&T Stadium.
The three issuances sold by the city were:
- 2018A: $266.1 million in Senior Lien Tax-Exempt Bonds. These bonds are at parity with the 2017 Stadium issuance refunding done last year, and as the name implies, have first claim on revenues received. The true interest cost on these bonds is 4.1 percent.
- 2018B: $ 28.2 million in Senior Lien Taxable Bonds. These bonds are at parity with the 2018A bonds and are taxable because a small amount of the City’s contribution is for private activity uses. The true interest cost on these bonds is 4.1 percent. While the taxable bonds have a higher interest rate on comparable maturities with the tax exempt, the bonds mature sooner, lowering the true interest cost.
- 2018C: $171.1 million in Subordinate Tax-Exempt Bonds. As the name implies, these bonds are in a secondary position to the Senior Lien bonds. The true interest cost on these bonds is 4.35 percent. The bonds have various early call features, which will allow the City to use special taxes after paying debt service to pay off bonds early.
Prior to the sale of the bonds, the three rating agencies reaffirmed the City’s bond ratings. The ratings on the senior lien bonds are AA+, A+ and A1 from Fitch, S&P and Moody’s respectively.
The subordinate lien bonds are rated A3 from Moody’s.
As part of the dealings, the City purchased bond insurance on the tax-exempt bonds, which increased the ratings to AA. In the past, the City had issued debt as part of Special Tax issuances to fund required reserves.
For the 2018 Bonds, the City took out a surety bond, which in the worst-case scenario would make up any deficit in revenues that would otherwise have been paid for by reserves.
This allowed the City to issue $30 million less in debt and avoid the attendant interest costs on the bonds.
The bond sale will conclude on March 20.
This article has been updated with new information.