NYC Water, Houston issue bonds amid tax exemption fears

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The ongoing debate about the tax exemption hasn't slowed the pace of new issuances across the country, which this month included the New York City Municipal Water Authority, Houston City Council and more.

The two-year municipal to UST ratio Tuesday was at 67%, the five-year at 71%, the 10-year at 74% and the 30-year at 90%, according to Municipal Market Data's 3 p.m. EDT read. ICE Data Services had the two-year at 66%, the five-year at 69%, the 10-year at 73% and the 30-year at 90% at 4 p.m.

Matt Fabian, a partner at Municipal Market Analytics, told The Bond Buyer that weakened performance has been due to a perfect storm of factors like "modest selling (via fund outflows and retail perhaps pausing during tax season); a heavy new issue calendar; and very thin near-term reinvestment expectations."

The tax exemption has remained a worrying question facing issuers, as new leadership with trade organizations, such as the Bond Dealers of America, work to preserve the municipal market's vital tax measure. The group named George Barbar, Florida-based senior managing director and head of regional development and strategy at Mesirow, as its next board chair effective March 1.

"The BDA does a great job of hitting on critical issues whatever they are at the time, and the tax exemption is definitely one of them this year," Barbar said. "Beyond the fly-ins and Hill meetings, the BDA is also partnering with other issuer groups to enhance the impact we have and really do our best to make a difference for the fixed-income community."

Read more: Trade war fears, tax-exempt doubts shake muni markets

This month, notable issuance news led off with updates on a 2023 issuance by the Oconee County government that has faced significant pushback from county residents and state advocacy groups.

Residents argued that since the $25 million in general obligation bonds would support wastewater development that only benefits a small portion of property owners in the region, the burden shouldn't be placed on all the property owners in the county.

"No law shall be enacted permitting the incurring of bonded indebtedness by any county for sewage disposal or treatment, fire protection, street lighting, garbage collection and disposal, water service … benefiting only a particular geographical section of a county unless a special assessment, tax or special charge in an amount designed to provide debt service … for such purposes shall be imposed upon the area or persons receiving the benefit therefrom," as per the constitution.

Other top deals feature a $600 million refunding deal by the New York City Municipal Water Authority, a ratings upgrade in a $925 million suite of prepaid natural gas bonds from Black Belt Energy Gas District and more.

Read more: Infrastructure grade fuels funding debate

Below is a summary of the news this month.

Oconee County, South Carolina, officials say a local sewer bond's environmental benefit to the county is one reason all county residents should be taxed for it.
Oconee County, South Carolina, officials say a local sewer bond's environmental benefit to the county is one reason all county residents should be taxed for it.

South Carolina sewer bond issuance draws widespread critique

A general obligation bond-funded sewer project being proposed by the Oconee County government in South Carolina has garnered sharp criticism from residents, alleging the environmental aftereffects will only benefit a small segment of citizens.

Representatives from the South Carolina Public Interest Foundation and numerous county residents filed a legal motion this month asking Judge R. Lawton McIntosh, of the Court of Common Pleas in the 10th Circuit, to walk back his decision to side with Oconee County government. The reasoning is that the burden of repaying the $25 million of general obligation bonds is placed on the entire county, while only a small segment will see a quality-of-life benefit from the wastewater improvements. 

Plaintiffs further cited the state constitution, which states that bonds supporting sewer service in a specified region require a special assessment to be created for said region to pay for the bonds before any public debt can be issued.

Read more: Reconsideration sought for South Carolina sewer bond ruling

NYC water
Nina Westervelt/Bloomberg

New York City Water Authority returns to market with refinancing

The New York City Municipal Water Authority jumped back into the fray with a $600 million refunding deal, just one month after concluding its prior issuance. 

The February new money deal was originally sized at $600 million, but was then upsized to $950 million. Rated Aa1 by Moody's Ratings and AA-plus by both S&P Global Ratings and Fitch Ratings, the second general resolution bonds have maturity dates from 2027 through 2032, 2037 through 2039, and 2046.

"I would expect that [the deal's underwriters] would not be counseling the authority to come to market unless they thought that they would see good demand," Patrick Luby, senior municipal strategist at CreditSights, told The Bond Buyer. "Which is kind of remarkable, given that investors had an opportunity to buy the name just a month ago."

Read more: New York City Water will flow back to the market with refunding

A rendering of the Mayo Clinic's modernized Rochester campus in winter. The modernization is part of Bold. Forward. Unbound, a sweeping initiative that potentially involves billions of debt over the next seven years.
A rendering of the Mayo Clinic's modernized Rochester campus in winter. The modernization is part of Bold. Forward. Unbound, a sweeping initiative that potentially involves billions of debt over the next seven years.
Mayo Clinic

Rochester's Mayo Clinic gets nod for expansion issuance

Members of the Rochester, Minnesota, City Council have greenlit a roughly $400 million conduit bond sale for the Mayo Clinic later this month.

The deal is composed of $97.9 million of Series 2025A fixed-rate revenue bonds; $91.4 million of Series 2025B seven-year put bonds; $100 million of Series 2025C variable rate bonds; and $100 million of Series 2025D variable rate bonds. Proceeds will be allocated toward backing the medical center's modernization campaign named "Bold. Forward. Unbound."

"The initiative is well underway at all of our campuses," Mayo CFO Dennis Dahlen told The Bond Buyer. "It includes multiple buildings, but the main parts of it are a hospital and integrated oncology building expansion in Florida that is mid-construction … and scheduled to be completed by 2027."

Read more: Rochester's Mayo Clinic bonds support broader expansion

Photo of a green pipe with the text "Natural Gas" on it.
Moody's upgraded expected bonds from Black Belt Energy Gas District to A1 from Baa1 this month.
Bloomberg News

Black Belt Energy Gas District debt sees rating hike

Moody's Ratings has upgraded anticipated bonds from Black Belt Energy Gas District from Baa1 to A1 on March 20, following a shift in the deal's liquidity provider from Deutsche Bank to Athene Annuity & Life Co.

Further details of the $925 million suite of prepaid natural gas bonds provided by Moody's include a shortened maturity timeframe from a planned 10.5 years to 8.5 years, as well as that Black Belt can push back that maturity date "by requiring bondholders to tender such bonds for purchase on or after the first business day of the third month preceding the maturity date," according to Moody's.

Athene declined The Bond Buyer's requests for comment.

Read more: Black Belt Energy Gas District bonds upgraded three notches

A rendering of the planned George R. Brown Houston South building that will expand Houston's convention center.
A rendering of the planned George R. Brown Houston South building that will expand Houston's convention center.
Houston First

Houston convention center buildout gains financing ground

Houston City Council representatives rubber stamped $325 million of interim financing for the $1 billion expansion to the George R. Brown Convention Center.

Passed ordinances revealed that Truist Bank will purchase $200 million worth of Series C-2 subordinate lien hotel occupancy tax and parking revenue flexible rate notes, while Huntington Capital Markets will pick up the remaining $125 million Series C-1 notes. Notes will be refunded at a later date in exchange for fixed-rate, 30-year bonds.

Plans released in March showcased a proposed 700,000-square-foot south exposition building that features two exhibition halls and the largest ballroom in the state.

Read more: Initial financing approved for Houston convention center project

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