Austin, Texas, sold $256.5 million in bonds to finance various capital improvements and refund a previous issuance.
The city sold the bonds in three series. The public improvement and refunding bonds, consisting of $221.95 million, mature between 2024 and 2043, yielding between 3.06% and 4.08%. The certificates of obligation, consisting of $25.79 million, mature between 2024 and 2043, yielding between 3.12% and 4.1%. The public property finance contractual obligations mature between 2024 and 2030, yielding between 3.12% and 3.39%. All of the bonds pay interest at 5%. The securities received a rating of AAA from S&P Global Ratings and AA+ from Fitch Ratings.
The rating “reflects the city’s very strong revenue profile and future growth prospects, moderate long-term liability burden and the highest level of financial resiliency,” according to Fitch.
The issuance comes amid a boom in Austin’s economy. The city recorded a 21% increase in sales tax revenue last fiscal year, leading to a $70 million general fund surplus. The city budgeted an additional 5.5% increase in sales tax for this fiscal year, an estimate which it now projects that it will beat.
Those economic tailwinds will help the city fund its ambitious capital improvement plan. The city estimates that it will fund $1.6 billion in capital spending in fiscal year 2024, according to the official statement accompanying the sale of the bonds. The city has allotted the largest appropriation in the plan, about $600 million, to aviation improvements.
The bonds are direct obligations of the city, payable by property taxes.
RBC Capital Markets, LLC served as lead underwriter on the issuance, purchasing the bonds at a total discount of around $900,000.