Featured Bond – Week of August 19, 2019: City of Houston, TX Combined Utility Revenue Bonds
Featured Bond – Week of August 19, 2019: City of Houston, Texas to Issue $785 Million in Combined Utility System Revenue Bonds
The City of Houston is issuing $785 million in Combined Utility System first lien revenue refunding bonds through negotiated sale. The bonds being sold are divided into three series. The largest series is the $540 million Combined Utility System First Lien Revenue Refunding Bonds, Taxable Series 2019 C. The 2019B bonds are $160 million in Combined Utility System First Lien Revenue Refunding Bonds. The 2020A bonds are $85 million in Combined Utility System First Lien Revenue Refunding Bonds (Forward Delivery). In the opinion of bond counsel, the interest on the 2019 C bonds are not tax-exempt for federal income taxes while the Series 2019B and Series 2020A (forward delivery) are deemed to be tax exempt.
The city of Houston has applied for ratings from Moody’s and S&P.
More About the Bonds & the City of Houston Combined Utility System
The proceeds of the Series B bonds, together with other available funds, are being issued for the purpose of refunding all or a portion of the City’s Outstanding Combined Utility System Commercial Paper Notes, Series B. The proceeds of the Series 2019C and the Series 2020A Bonds will be used, together with other available funds, to refund a portion of the City’s Outstanding Combined Utility System First Lien Revenue Bonds (as described in detail in the official statement). A portion of the proceeds from all three bond series will cover the costs of issuance. The funds from the bond offering will be used together with other available fund to purchase a portfolio of obligations authorized under State law and the ordinances authorizing the “Refunded Bonds” to be deposited in one or more escrow funds designed to pay, when due the principal of and interest on the “Refunded Bonds”. A similar arrangement is also being structured for the “Refunded Notes”. Prospective investors should consult the official statement to review the details of the transaction, including the summarized security description shown below.
The city of Houston’s combined utility system provides water and sewer services for the city and parts of the region. The system provides water for approximately 6 million persons and 485,000 water accounts in a four county area. The wastewater division covers 463,000 active accounts. The city’s population base numbers just over 2.3 million people. Since the year 2000, the Houston-The Woodlands-Sugar Land CBSA metropolitan area has grown 48%.
The June 2019 unemployment rate in the Houston-The Woodlands-Sugar Land CBSA is 3.8%.
Security for the Bonds
The Bonds are special obligations of the city payable from and secured by a lien on net revenues of the System as collected and received by the city from the operation and ownership of the Combined Utility System. The lien on net revenues of the system securing the bonds is subordinate to the lien securing previous ordinance bonds in an aggregate amount of approximately $179.4 million as of June 30, 2019. The city will not issue any additional bonds or other obligations under the previous ordinance. The city has determined that the Bonds being issued will not be Reserve Fund Participants. The bonds do not constitute a general obligation of the city and are not paid by taxes.
These details and more on purposes, security, risks and other matters pertaining to these City of Houston Combined Utility System Bonds can the found in the official statement, provided by MuniOS. After registering, if needed, visitors can link directly to the official statement as well as an investor’s roadshow by searching for the City of Houston.
Statistical Snapshot: City of Houston Combined Utility System Revenue Bonds Selected Financial and Economic Indicators FY 2018
These facts and numbers are for informational purposes, and should not be considered an official disclosure for potential investors. Investors should consult the official statement. None of the information provided should be construed as a recommendation by MuniNet Guide, MuniNet LLC, Merritt Research Services LLC, or any of their employees. Information and analysis is for informational purposes only.
Potential investors should rely only on the official documents and figures provided in the official statement (prospectus). Although the numbers presented in this summary are primarily derived from public documents, including issuer audits, issuer reports and other public sources such as federal reporting agencies , they are not intended to replace official information presented in connection with the bond sale. Medians may differ from official sales documents due to methodology or survey base variances.