Public Finance

City of Little Rock, Arkansas

How looking at the big picture yielded big results for our client, the City of Little Rock, Arkansas.

Date: October 27, 2017
Client: City of Little Rock, Arkansas
Par Amount: $17,900,000
Transaction: Refunding Tax-Exempt Bonds, Series 2009
Role: Sole Manager

At Stephens, we are committed to establishing and maintaining long-term relationships, delivering long-term results. Here’s an example of how looking at the big picture yielded big results for our client, the City of Little Rock, Arkansas.

The City receives over $20 million annually in franchise fee revenue. Franchise fees are received from public utilities for the privilege of using the streets, highways and other public places in the City. Buyers of municipal bonds are familiar with debt secured by franchise fee revenues. To the extent not needed for operations, cities may use these monies to finance capital projects – from new streets and street improvements to fire and police department facilities to sewer improvements and park and community center facilities.

The City of Little Rock used these revenues in the past on a limited basis to finance street improvements and certain facilities for the conservation of energy, with approximately $1.8 million paying annual debt service on their Series 2007 Capital Improvement Revenue Refunding Bonds and Series 2002 Capital Improvement Junior Lien Revenue Bonds.

After reviewing the overall debt outstanding for the City, Stephens suggested the City issue bonds secured by its franchise fee revenues and use the bond proceeds to refund not only the Series 2002 and Series 2007 bonds, but to also refund the City’s Series 2009 A and B Parks and Recreation Bonds. The Series 2009 bonds had been issued and secured by the City’s parks revenues. However, we knew that bonds secured by franchise fee revenues would achieve a stronger credit rating than parks revenue.

On October 12, 2017, Stephens successfully priced a $17.9 million financing of tax-exempt bonds to refund these four outstanding bond issues of the City of Little Rock, Arkansas.

This structure resulted in the City achieving the following objectives:

1) A higher bond rating (compared with the Series 2009 bond structure secured by Park revenues), thereby a lower cost of funds;

2) Release of cash held in a Series 2009 operating fund of over $500,000, which was used to reduce the size of the new bond issue;

3) Released debt service reserve funds of over $1 million, which were used to reduce the size of the new bond issue;

4) Eliminated cumbersome continuing disclosure requirements of the Series 2009 Bonds associated with park operating information;

5) Reduced the maturity of the City’s original debt from 2039 to 2034 – a six (6) year reduction in required annual debt service; and

6) Achieved gross cash flow savings of over $8 million to the City. On a net present value basis, over $4 million or 20% was achieved.

At Stephens, we build value for our clients. Let us put our deep research and expert thinking to work for you.

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