The city of Fishers, Indiana, is planning a $170 million lease rental revenue bond sale to finance construction of an arena for a minor league hockey team, a move that sparked a downgrade to the city.
The Fishers Town Hall Building Corp. is on the calendar this week to price $160 million of tax-exempt Series 2023A bonds and $10 million of taxable Series 2023B bonds.
The debt the city is taking on for the sports venue helped drive an S&P Global Ratings downgrade ahead of the deal. S&P cut Fishers' outstanding debt secured by local income tax or County Option Income Tax to AA from AA-minus, and assigned the AA rating to the arena deal.
"The downgrade reflects our view of the city's declining coverage and liquidity, which we now view as adequate," S&P credit analyst Bobby Otter said in a release.
The office of Mayor Scott Fadness did not respond to a request for comment.
Raymond James & Associates is underwriting the deal. Baker Tilly Municipal Advisors is financial advisor to the building corporation.
Pricing was tentatively scheduled for Wednesday, according to a Raymond James weekly report for bond investors.
The proceeds will be used to build a new 8,500-seat arena for the Indy Fuel of the ECHL, the minor league once known as the East Coast Hockey League before an expansion that has brought it to 28 teams as far west as Boise, Idaho, and Utah.
The ECHL is the second tier of hockey's minor leagues, under the American Hockey League.
The team is affiliated with the AHL's Rockford Ice Dogs in Illinois and that team's parent, the NHL Chicago Blackhawks.
The eight-story arena, called the Fishers Event Center, is scheduled to open next year. The team is currently soliciting naming rights for the stadium, which in addition to all Fuel home games is slated to host 125 to 150 other events during the year, including concerts, entertainment productions and municipal events.
It expects to attract more than 1.4 million visitors each year.
City officials say the new venue will anchor a nearly $550 million expansion of the Fishers District lifestyle and entertainment destination in Fishers.
The suburb, 18 miles northeast of downtown Indianapolis beyond that city's beltway highway, has grown from less than 10,000 people in 1990 to more than 100,000, according to the most recent Census estimate.
The Fuel will launch their 10th season in the ECHL Friday against the Fort Wayne Komets.
The Fuel will continue to play their home games at the Indiana Farmers Coliseum at the Indiana State Fairgrounds in Indianapolis until the new building is completed.
The hockey team is owned by Jim Hallett, who retired in March as executive chairman of KAR Auction Services, an operator of digital marketplaces for wholesale used vehicles.
According to S&P, the city will use the proceeds to redeem its Series 2022 bond anticipation notes and provide permanent construction of the facility.
"We note that Fishers' debt burden is very high and if the city continues to leverage income tax as a security for its debt, and results in a further reduction in coverage, then it could pressure the rating," S&P said in its rating report.
Its two-year stable outlook reflects our expectation that local income tax certifications will continue to provide more than 1.7 times debt service coverage on all parity income tax bonds.
The Fuel have signed a 20-year lease with the event center through 2045.
"While not pledged, the city expects revenue from several sources will cover debt service payments," S&P said, including "a recently implemented food and beverage tax, payments in lieu of taxes, revenue from the creation of the Professional Sports and Convention Development Area, which will be a special taxing district within the event center; and other revenues, including fees from the sale of tickets at the event center and the cumulative capital development fund."
On Sept. 14, when it rated the bonds AA, S&P also lowered Fishers' tax-secured debt from AA-plus, citing what it said was its "declining coverage and liquidity;"
Following the rating downgrade, S&P now views debt service coverage as "adequate," down from "very strong."
The city's debt is secured by a local income tax and a Hamilton County option income tax. The rating agency also cited Hamilton County's "broad and diverse tax base," which serves as "the economic anchor of central Indiana's growing economy." It calls the area's economic fundamentals "very strong," noting that "the state's wealthiest cities are within the county."
The city has an average household income of more than $145,532 with a poverty rate of less than 3%. The median age is 36.7 years.
Eli Lilly & Co., the large pharmaceutical company, is Hamilton County's biggest taxpayer and the three largest employers are all healthcare providers.
The city's business recruitment efforts pitch it as a life sciences hub.
Another part of that pitch is the city's entertainment and arts offerings, portrayed as a cornerstone of attracting an educated high-income workforce.
