NYC Bonds

To Our Investor Community:

September was a memorable month for New York City’s debt program.  The highly anticipated $2 billion Sales Tax Asset Receivable Corporation (STAR) bond sale received overwhelming market interest and will provide $650+ million budget relief to taxpayers. 

The New York City Municipal Water Finance Authority (NYW) executed an innovative $500 million plan of finance combining competitive and negotiated bond sales. And the Comptroller’s office released its plan for a New York City Green Bond Program, which would focus investments on environmentally beneficial capital projects.  

A Green Bond Program for New York City

On September 24, Comptroller Stringer released a plan to make New York City the first major city in the nation to sell bonds targeted to environmental protection and sustainability.  “A Green Bond Program for New York City” details how the City can offer investors a new way to participate in the financing of environmentally conscious projects through the purchase of General Obligation, Transitional Finance Authority and NYW bonds.

The Comptroller’s plan provides background on the growing Green Bond market as well as providing a road-map on how to implement the program given the City’s complex accounting and budgeting. The plan identifies significant benefits to the City from a Green Bond program, including an expanded investor base and encouraging a greener New York City capital program.

Following Superstorm Sandy, the 2013 update to PlaNYC, as well as other initiatives launched by the current Administration and ongoing Department of Environmental Protection expenditures, represent a large pool of potential Green Projects. We encourage you to read the report and are we working to make an ongoing Green Bonds program part of New York City’s future.

$2 Billion NYC STAR Refunding

The STAR credit was created in 2003 and issued bonds in 2004 to retire the outstanding bonds of the Municipal Assistance Corporation of the City of New York (MAC) and the outstanding bonds of the City held by MAC.  STAR bonds are secured by an annual payment of $170 million due to the City from the New York State Local Government Assistance Corporation (LGAC).
The September STAR 2015 A transaction refunded the remaining $2 billion from the original 2004 bond sale.  Budget savings from refunding the bonds and releasing debt service reserve fund monies will exceed $650 million over the next three fiscal years.

During the September 12th and 13th retail order period, STAR received over $885 million of orders from individual investors. Strong demand continued in the institutional pricing, making it possible to reduce yields by up to eight basis points in eleven maturities. More details are available in the press release.

The STAR transaction was also notable for high participation by MWBE firms. J.P. Morgan, Goldman, Sachs & Co., Loop Capital Markets LLC, Raymond James, and Siebert Brandford Shank & Co., L.L.C. with Ramirez & Co., served as joint lead managers.  These managers were selected after a Request for Qualifications process undertaken jointly by STAR and the Comptroller’s Office.  The selections reflected the considerable resources and advice provided by these firms for several years. STAR required that 38% of the institutional sales commission be awarded to the three MWBE firms: Loop Capital Markets, Siebert Brandford Shank & Co., and Ramirez & Co.

The bonds are rated AAA by Standard & Poor’s, Aa1 by Moody’s Investor Service, and AA+ by Fitch Ratings.

$500 Million NYW Combined Sale

NYW’s September plan of finance was an unusual two part transaction.  First, $200 million fixed-rate tax exempt new money bonds were competitively sold on September 10th.    NYW received 10 bids with Bank of America Merrill Lynch the winning bidder.

The second half of the transaction was a negotiated sale of refunding bonds on September 16th.  Rice Financial Products Company served as book-running senior manager for the $300 million fixed-rate tax exempt refunding bonds.  Over $104 million in individual investor orders and comparable institutional investor demand allowed NYW to reduce yields in all maturities by two to five basis points as well as upsize the deal by approximately $75 million, from the $225 million originally offered.  The refunding will save New York City water and sewer rate payers more than $59 million over the life of the bonds. The press release has further details.

NYW’s second resolution bonds are rated AA+ by Fitch Ratings, Aa2 by Moody’s Investors Service and AA+ by Standard & Poor’s.

Looking Ahead to October

The Comptroller’s office is scheduled to release its charter-mandated Comprehensive Annual Financial Report (CAFR) for the 2014 Fiscal Year on October 31st.  The City elected to early-adopt the new GASB 68 pension reporting standards, which will be reflected in the FY2014 CAFR.

There are no planned bond sales for October, but multiple sales in November and December. Information on how to buy New York City bonds is available on the Comptroller’s website.  You can subscribe to receive sale announcements and other City publications and reports.  The New York State Comptroller also maintains a website with a preliminary forward calendar for major State and City issuers.

As always, we appreciate your interest in New York City bonds.  Please contact us if you have any questions or suggestions as to how we can improve our investor communications.                                          
Carol S. Kostik          
Deputy Comptroller for Public Finance