City sells nearly $272 million in fixed rate long-term bonds to fund City’s contribution to arena
Today the City sold $272.9 million in fixed rate, long-term bonds to fund its contribution to the construction of the Golden 1 Center in downtown Sacramento. The amount will be put toward the City’s $255 million share of the Golden 1 Center, 10 months after the City and Sacramento Kings broke ground on the new $507 million downtown arena. The bond sale had been stalled due to a lawsuit by citizens. The City ultimately prevailed in August.
“The project is great for the City and this financing is a good deal for the City,” said City Treasurer Russ Fehr, who is in New York City to finalize the deal.
The overall interest rate on the bonds is 5.67 percent, less than 6.70 percent that was forecasted when the City Council approved the finance plan in May 2014. Given today’s lower interest rate, the annual net debt service is approximately $18 million, compared to the estimated $21.9 million annual debt service forecasted in the 2014 finance plan, saving about $125 million over 35 years. The lower interest rate was based on excellent A+ and A credit ratings from Standard & Poor’s and Fitch respectively, which considered the City of Sacramento’s strong leadership and financial management.
“Four years ago, I had an idea that the City could use its off-street parking revenue to finance the Mayor’s vision of a downtown arena for Sacramento, without giving up ownership or control of the system or laying off employees” said Fehr. “The concept has evolved. Sacramento Kings payments to the City will cover more than 75 percent of the debt payments over time.”
Today’s sale is the second of two sales, representing the conversion of a short-term bond issue last month to a long-term (35-year) fixed rate.
The $272.9 million total in bonds sold includes funds for debt reserves, interest expense during construction, and costs of issuing the debt.
The money to pay the $18 million in annual debt service is coming from three sources. In the early years, the majority of the debt will be paid from the City’s parking enterprise fund, which consists of revenues from off-street parking such as downtown parking lots and garages. Over time, the majority of the annual debt payment will come from lease payments and property taxes paid by the Sacramento Kings.
Any questions about purchasing a Golden 1 Center bond can be directed to a licensed investment broker or Goldman Sachs.