Arlington Successfully Sells Bonds for Globe Life Field Construction Contribution
The City of Arlington successfully sold $465.4 million in bonds on Wednesday, March 7, to fund the voter-approved contribution to the Texas Rangers $1.1 billion retractable-roof ballpark project.
Arlington's contribution is fully funded at $500 million, as the City is receiving premiums for the tax-exempt bonds. A premium is what an investor is willing to pay over par value to receive a higher interest rate.
Overall, 87 investors put in a total of $1.9 billion in orders for bonds, more than four times the amount of the available bonds to sell. This is indicative of a belief in the City's credit and Arlington's history of successfully funding and managing these types of public-private projects. Because of this high demand, the City was able to lower the interest rate by as many as 10 basis points on some of the maturities.
The Rangers' lease on the future Globe Life Field, set to open in 2020, runs through 2054.
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 debt on AT&T Stadium, home of the Dallas Cowboys.
On March 7, the City sold three issuances:
- 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 bond sale, 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 transactions, the City purchased bond insurance on the tax-exempt bonds, which increased the ratings to AA. In the past, the City has 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 shortfall 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 close on March 20.
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Ballpark Project, Texas Rangers
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