A Bonding They Will Go-Go

What separates Norwalk from Stamford and New Haven when it comes to getting things built? Well we look no farther than bonds, municipal bonds. Harbor Point, the place where we keep reading about corporate relocations heading into, just received $145 million in a bond sale. The Advocate reports the details:

“This financing is the largest of its kind since the credit crisis began, made possible by the project’s location, private and public support, and experienced development team,” said Ramiro Albarran, a managing director at Stone & Youngberg.

Of the bonds, $16 million were authorized under the Recovery Zone Bond Program, a federal stimulus program providing low-cost financing to shovel-ready projects. The bonds, which are taxable and due in 2039, will receive a federal reimbursement for 45 percent of the interest. Taking the interest subsidy into account, the net interest rate of the recovery bonds will be 6.875 percent, according to Albarran.

The remaining $129 million was raised through the sale of tax-exempt special obligation revenue bonds, a class of municipal bonds. Within that category, Albarran said $113 million of the bonds had a 7.875 percent interest rate and a maturity date of 2039, while $15.9 million had a 7 percent interest rate and a maturity date of 2022.

The city, which had reserved the right to approve the interest rate carried by the bonds, had anticipated an interest rate between 6 and 9 percent.

The developer is solely responsible for paying back the bonds. As part of its agreement with the city, 50 percent of any additional tax revenue earned in the Harbor Point district will go toward making bond payments, while the remaining half will go toward the city’s general fund.

In a press release, Carl Kuehner, president and CEO of Building and Land Technology, said the financing would allow the company to “increase the pace of development” and “create jobs during this difficult economy.”

The plans for Harbor Point include 4,000 units of housing, 400,000 square feet of retail space, office buildings, two hotels, a school, marina and more than 11 acres of parks.

Its first retail tenant, Fairway supermarket, is expected to open an 80,000- square-foot store at the corner of Canal and Market streets in August.

Lest you think that it’s all about Stamford, the City of New Haven also announced its sizzling bond sale.

NEW HAVEN- Mayor John DeStefano, Jr. and the Bond Sale Committee of the
City of New Haven announced today that they successfully offered
$50,400,000 of bonds in a competitive bidding process. �The sale
attracted 12 bidders nationwide and was achieved after the City’s
credit rating was confirmed by the three national rating agencies. The
list included many bidders who were bidding on the City’s bonds for
the first time.

For this bond sale, the City took advantage of the new Federal program
which allows the New Haven to offer a series of bonds which qualify for
an interest subsidy of 35 percent from the Federal government under the
Build America Bonds (BABs) Federal Stimulus Program. The interest rate
payable by the City was determined for both the Series A exempt and
Series B BABS. The tax exempt bonds were issued at an interest rate
payable by the City of 1.75 percent and the overall rate payable by the
City after application of the Federal tax credit was 3.97 percent.

Recognizing the success of this bond sale DeStefano said, “The City
was able to recognize really low interest rates which is good for tax
payers and is also a strong commentary on the City’s stable
finances.”

“The City’s overall savings represent a historic achievement and
reflect confidence in our financial condition during a challenging
economic environment and a national recession,” said Lawrence Rusconi,
Director of the Office of Management and Budget.

The City is estimated to have saved approximately $3.5 million through
the use of the new program.

And for those of you interested in the Build America Program from Bloomberg.com:

The American Recovery and Reinvestment Act the president signed almost a year ago included a provision to subsidize the interest rate on bonds for capital projects if governments sold taxable instead of tax-exempt debt.

�One-for-One’

States and municipalities typically choose to sell Build America debt to finance roads, schools and sewers when their after-subsidy cost of capital is lower. The bonds have become a “one-for-one transfer” of sales from the tax-exempt market, Loop Capital Markets said in a December report.

A lower subsidy may mean higher-rated governments and those selling shorter-term debt will find it more economic to sell traditional tax-exempts instead of subsidized taxable securities, leaving lower-rated issuers to dominate the Build America market, DeGroot said.

“Before it was sort of a no-brainer,” selling bonds with a 35 percent subsidy, said�Brian Mayhew, chief financial officer of the Bay Area Toll Authority, which sold $1.3 billion of 40- year bonds under the program last year. “Now there will be a bit more of an analysis” to see whether sales make sense with a lower subsidy, he said.

The proposal to make the program permanent may draw more Build America buyers, lowering yields and increasing sales of the securities this year, said�Matt Dalton, chief executive of Belle Haven Investments Inc. in White Plains, New York, who oversees about $350 million.

�More Players’

“The more players, obviously, the tighter they should trade relative to Treasuries, which in turn helps make them more viable for municipal authorities to bring to the market,” Dalton said. “If there are enough people that care about taxable municipals, the liquidity will allow the issuers to issue in larger size.”