A county north of Tampa, Florida, finalized a sale of more than $325 million in bonds to develop a cancer center in Tampa and its expansion to neighboring Pasco County.
Proceeds from the bonds will be backed by a Florida state tax on cigarettes. The series 2023A bonds, issued by Pasco County, carry maturities between 2025 and 2054, with coupon rates between 3.27% and 4.8%.
Interest on the bonds will be paid twice annually, beginning in September of 2023.
Proceeds from the sale will be loaned to the H. Lee Moffitt Cancer Center and Research Institute, located in Tampa. Ratings agency Moody’s Investors Service assigned the bonds an “A1” rating, and S&P Global Ratings gave the bonds an “A” rating.
“Though the total revenue stream is extremely volatile and overall declining, the statutory allocation is stable, comprises a fraction of total collections and provides just over sum sufficient coverage through the life of the bonds,” Moody’s analysts Denise Rappmund and Emily Raimes wrote about the bond issuance.
Since 2014, Florida law has allocated a portion of cigarette tax revenue directly to the Moffitt Cancer Center. This week’s bond issuance will be payable exclusively by that tax revenue. If there is not enough cigarette tax revenue collected by the state, buyers of the bond will not hold a general obligation over the Moffitt Cancer Center.
The Moffitt Cancer Center has become one of the largest recipients of cigarette tax allocations in the state. From 2014 until 2021, the Moffitt Cancer Center received 4.04% of net cigarette tax revenue, or about $15.5 million per year. In July 2021, that figure was revised to 7%, with an additional increase to 10% approved to take effect in 2024.
Pasco County has long sought to become home to the Moffitt Cancer Center’s expansion. Plans to build a biotech center in the county were included in the state’s budget in 2022, but the funding was vetoed by governor Ron DeSantis.
In addition to development of the Moffitt Cancer Center’s main operations in Tampa, this week’s bonds will finance “one or more research buildings, proton therapy centers, Moffitt Ambulatory Clinics, and other capital expenses associated with the Institute’s new development in Pasco County,” according to the official statement announcing the sale of the bonds.
The issuance marks the fifth financing agreement the Institute has reached to finance a bond sale. The first agreement was reached with the city of Tampa in 2012.
A group of banks, including BofA Securities, Inc., RBC Capital Markets, LLC, Citigroup Global Markets Inc., Goldman Sachs & Co. LLC, and J.P. Morgan Securities LLC, acted as underwriter for the bond issuance. The group of banks purchased the bonds for over $350 million, representing a premium of over $27 million on the issuance.