Fresh off a ratings upgrade, New York’s Erie County will be in the market over the coming week with a small but significant deal.
FHN Financial Capital Markets is expected to value the county’s $29.675 million Series 2022 general bond on Tuesday, August 16.
The agreement consists of $28.525 million of Series 2022A Public Improvement Series Bonds maturing from 2023 to 2037 and $1.15 million of Series 2022B Sewer District Series Bonds maturing from maturity from 2023 to 2037.
The co-managers of the agreement are Jefferies and TD Securities. The financial advisor is Masterson Advisors LLC. The Bonds’ attorney is Hodgson Russ LLP and the Underwriters’ attorney is Barclay Damon LLP. The independent auditor is Drescher & Malecki LLP.
On August 4, S&P Global Ratings raised the county’s long-term and GO ratings from AA-minus to AA and gave the deal an AA rating. The credit outlook is stable.
“The rating action reflects a materially improved reserve position, at a level that we believe to be very strong and expect the county to maintain, as well as economic growth that will continue to support balanced operations,” the statement said. S&P analyst Christian Richards.
The county’s faith and credit pledge secures the 2022 GOs, including legal authority to levy ad valorem taxes on all properties in the county.
“This is our normal annual borrowing,” Timothy Callan, assistant controller, told The Bond Buyer. “Profits go to buildings, highway projects and the community college. We do that every year.”
Officials intend to use the proceeds to fund various capital improvements for infrastructure and also fund some sewer projects in the county.
“We are very pleased to have received an upgrade,” County Comptroller Kevin Hardwick told The Bond Buyer. “We expected that after having a call with S&P a few weeks ago and it went really well. I think it’s because we had a great story to tell.”
He said the county was due for an upgrade.
“We had a good run here in Erie County,” he said, adding, “Everything indicates that’s going to continue in the future.”
Hardwick, who took over as comptroller in January, highlighted the county’s skillful handling of the COVID pandemic, calling it impressive.
“I was in the county legislature at the time and we had to deal with issues in a bipartisan way, like other municipalities across the country.”
The county saw a loss in sales tax and state aid revenue, resulting in an estimated $138 million hole in the budget, he said.
“With the county executive, the legislature was able to shut this down,” he said, adding that tough decisions had been made, including layoffs of employees.
“But the decisions we made back then and everything that’s happened since has put us in a great position and that’s obviously a big part of why we got this upgrade.”
Rating agency Kroll Bond on August 4 gave the county deal an AA-minus rating and has a positive outlook on the credit.
“The positive outlook recognizes Erie County’s well underway economic growth and diversification, facilitated by significant public and private investment and population growth,” Kroll said. “We view these trends as supportive of income stability throughout the business cycle.”
Kroll said he would continue to monitor the rating based on the county’s demonstration of a continued positive cash position, stable fund balance reserves and budget surpluses in the absence of federal stimulus. and/or pandemic-related state aid.
The county’s performance year-to-date in fiscal 2022 exceeded its budget projections, with $138 million in sales tax revenue in the first quarter, up 20% from the prior year.
Through May 31, the county’s $33 million positive budget variance put it on track to see a projected budget surplus of about $50 million. The budget variance is the difference between the budgeted expenditure or revenue and the actual amount.
The county said its positive cash position ruled out the need to sell revenue anticipation tickets this year.
Erie County, which includes the city of Buffalo, is the eighth most populous county in New York State, with approximately 951,000 residents.
Over the past 10 years, the county has made a massive investment in commercial and residential redevelopment initiatives, which has spurred economic and population growth. Projects including the remediation of a brownfield site for use as a business park and the expansion of the University at Buffalo Medical School are expected to create jobs and economic benefits in the county and region.
One of the greatest economic development initiatives is yet to come.
Next year, the county will sell $150 million in bonds to part fund a $1.4 billion stadium for the National Football League’s Buffalo Bills.
The public-private sector investment will see the county contribute a total of $250 million to the cost, split into $150 million in bonds and $100 million in cash. The stadium’s debt service will be mitigated by annual operating cost savings, according to the county.
Around 2,000 construction jobs are expected to be created.
The state and family-owned Bills will cover the rest of the construction costs, divided into approximately $600 million each. The state should also sell bonds for the stadium. The project was included in the state’s $220 billion fiscal year 2023 budget in the spring.
“I think this deal is a bit like pre-season football,” Hardwick said. “We see this new number as preparation for next year – the big event – when we hope to bond for our new stadium.”
