Bonds

Jacksonville, Florida, soliciting underwriters for next round of deals

The city of Jacksonville, Florida, is seeking bids for underwriters to manage its bond issues for the next several years.

The Sunshine State’s biggest city, with more than 950,000 residents — and the largest in area in the entire continental U.S. — is soliciting information from qualified firms to serve as senior managing underwriter or co-manager for its bond issues to raise capital or to refinance previous bond issues. The initial term of the engagement is for three years, plus two one-year renewals at the city’s option.

Bids are due to the city by Feb. 22 at 2 p.m. EST.

A park in Jacksonville, Florida. The city has put out a solicitation for municipal bond underwriters.

Bloomberg News

The city’s Request for Information said it’s looking for “a diverse group of qualified firms with varied strengths and market advantages” that “can provide the most cost-effective distribution for its bonds and be available to provide ideas and implement debt management strategies.” Thirty percent of the criteria for selecting underwriters will be based on the experience of their primary personnel, plus 20% each on their experience with similar transactions, their finance plan for the city, and credit and marketing analysis. Ten percent will be based on the firm’s “reasonableness of gross spread and takedowns.”

If the city sells more than one bond issue, the book-running responsibilities among the senior managers may be awarded on a competitive basis or rotated between the senior managers at the city’s discretion.

Among other things, the city is asking prospective underwriters to discuss their approach to using BVAL versus MMD yield curve methods to price bond issues. BVAL is a proprietary yield curve created by Bloomberg, while MMD was created by Municipal Market Data.

Jacksonville currently has about $1.8 billion of debt outstanding, according to Jeremy Niedfeldt, managing director at PFM Financial Advisors in Orlando, the city’s financial advisor. The city generally operates through the year using a commercial paper facility, which it then refinances toward the end of its fiscal year, usually in August or September.

The city last sold bonds in August 2023, when it sold $290 million of special revenue and refunding bonds. That deal was underwritten by a group led by Raymond James & Associates.

About a third of the city’s bonded debt was issued for the Better Jacksonville Plan, a $2.25 billion program that was adopted in 2000 to fund roads, infrastructure projects and economic development. That debt is backed by a half-cent sales tax, half of which goes to cover BJP infrastructure projects and the other half for transportation projects.

According to Niedfeldt, the city has “been pretty aggressive in debt reduction and a lot of it is due to their overperformance in sales tax revenue.” The city expects to pay off the BJP debt over the next three years, after which the sales tax revenue is earmarked to pay down the city’s $3 billion in pension obligations until they are fully funded.

In September the Jacksonville Florida Times-Union said the city is “flush with cash because the strong economy will reap a big jump in city tax revenue” during its current fiscal year, which began Oct. 1. The city’s current budget, which was approved in late September, totaled $1.75 billion, a 14% increase over the prior year’s $1.54 billion.

The city’s general obligation debt is rated Aa2 by Moody’s Investors Services, AA by S&P Global Ratings, and AA by Fitch Ratings.

According to an August 2023 report by Fitch, Jacksonville’s population grew by 16% between 2000 and 2021. It noted that “the city’s employment base is less highly concentrated in tourism than Florida as a whole and has a strong federal government representation given the presence of several naval air stations.”

While it rates the city’s GO debt at AA, Fitch rates Jacksonville’s operating performance at AAA and expects it to “maintain a high level of fundamental financial flexibility on the basis of its sound historical budget management and the robustness of unrestricted reserves relative to the city’s revenue raising powers and limited spending flexibility.”

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