City successfully sells bonds for Convention Center Complex Project; receives low overall borrowing rate

Receiving strong interest from California and national investors, the City of Sacramento successfully has raised just over $300 million in the bond market through the recent sales of three series of bonds.

The money, which was secured at a low overall borrowing rate of 4.1 percent over 30 years, represents a key milestone for the Convention Center Complex Project, also known as the C3 Project. The bonds will fund the renovation and expansion of the Sacramento Convention Center, the renovation of the Community Center Theater and improvements to the Memorial Auditorium.

“This represents an important investment in our city,” Mayor Darrell Steinberg said. “Expanding our Convention Center helps attract more visitors and spurs economic growth.”

The bonds will not be repaid by the City’s general fund. They will be repaid by a portion of the City’s transient occupancy tax, or TOT, a 12-percent tax on hotel rooms and short-term rental stays.

Prior to the bond sales on Oct. 17, the bonds’ credit quality was reviewed by Moody’s Investors Service, which assigned a strong “A1” for the senior lien bonds and “A2” for the subordinate lien bonds.  Moody’s cited “the economic strength of the Sacramento area, which is the fastest growing large city in California with robust growth in travel and tourism” as key credit qualities.

In preparation for the bond sale, City Treasurer John Colville led an investor marketing campaign that included direct discussions with nearly a dozen large institutional investors. The bonds received an overwhelming response from investors, with more than $1.1 billion of orders from investors in California and nationwide, resulting in the low overall borrowing rate. Several investors placed orders for City of Sacramento bonds for the first time.

“We were excited to see the positive response and the confidence that bond investors from all over the country demonstrated for the City of Sacramento and the project,” Colville said.

The City is expected to be back in the bond market early next year for a bond issue for the ballroom portion of the Convention Center.  Estimated size is $50 million, and the bonds are anticipated to be paid by a new assessment that may be imposed on hotels and other short-term lodging businesses within the boundary of the proposed Sacramento Tourism Infrastructure District.

Construction on the C3 Project began in June with the Memorial Auditorium. The Convention Center will begin its renovation/expansion in December and will host conventions into summer 2019 before its closure. It will reopen in November 2020.

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