DALLAS -- Triple-A rated Dallas yesterday priced its largest general obligation deal in seven years, a $166.3 million refunding that is only the first of several issues planned for the coming months.
A team led by Goldman, Sachs & Co. priced and repriced the general obligation refunding bonds.
The yield on the 1993 maturity was lowered by 30 basis points, the yield on the 1995 maturity by 10 basis points, and the yield on the 1996 maturity by five basis points.
The final reoffering scale included serial bonds offered to investors at yields ranging from 2.90% in 1993 to 6.10% in 2005.
The managers said they expect Moody's Investors Service to rate the issue Aaa and Standard & Poor's Corp. to confirm an AAA.
The refunding is the first of two deals set for this week. On Wednesday, the city plans to competitively sell $9.7 million in certificates of obligation to pay for badly needed renovations to the Cotton Bowl football stadium.
For several years, the city's shrinking tax base has hampered new-money issuance. But Dallas officials, newly confident that the economy is on the mend, now say in the next 16 months they plan to use up the remaining $196.1 million of GO bonds authorized by voters in 1985 and 1989.
By the time the last bonds are sold, the city expects to ask its voters -- who have never rejected a capital plan -- to approve at least $300 million in new bonds.
"We anticipate that the next bond election will be held in late 1993 or early 1994," said City Manager Jan Hart. "We'll be planning that over the next 18 months, but right now we anticipate $300 million."
She added, "There are a lot of lists of projects to review, but I think any issue is going to be one that is in line with what the capital needs of Dallas will be."
The city has not used up its outstanding authorization from voters because of its conservative financial practices, such as a rule against issuing more new debt than it retires.
"We are scheduled to try and complete our 1985 bond program," said Dallas Councilman Max Wells, chairman of the city's Finance Committee. "Traditionally, the city has issued bonds over every four years or so, but our rules have slowed us down."
Winston Evans, the city's director of revenue and taxation, agreed. "We have taken the 1985 bond program and increased its length so as to issue no more bonds than we retire each year," he said.
The city's cautious fiscal policies have earned it triple-A ratings from Moody's and Standard & Poor's. But the sharp downturn in the Texas economy and an extended decline in the city's tax base have prevented Dallas from pursuing large-scale bond issuance in recent years.
"We know that the property values have not been stellar," said Peter D'Erchia, senior vice president at Standard & Poor's. "The recovery hasn't been strong."
While city officials had expected the tax base to recover before now, they believe the worst is behind Dallas. Even so, the city did not change its financial criteria because of the downturn.
By contrast, Houston later this month expects to sell an estimated $450 million of GO refunding bonds in a move to restructure the city's debt to help balance the budget for fiscal 1993, which begins July 1.
Dallas, however, is selling its refunding for economic reasons. Because of current interest rates, the city expects a present value savings of 6%, which is one notch better than the city's own criteria.
"This refunding now makes sense in the market," Ms. Hart said.
Now the city will focus on an October sale of $90.4 million in GO new-money bonds. The remaining authorization will be sold a year later, in October 1993.
First, however, the city plans a $9.7 million competitive sale of a combined tax and revenue certificates of obligation to fund renovations to the city-owned Cotton Bowl, host to the eponymous New Year's Day college football game.
The certificates are backed by a pledge of property taxes levied by the city and by a limited pledge of surplus net revenues from the city's convention facilities.
Ultimately, Dallas officials hope to use a one-time, half-percent increase in the sales tax to generate moneys to pay the debt service and to fund other projects.
The Dallas City Council earlier this year agreed to seek authorization from the Texas Legislature to increase its tax rate a half-percentage point above the current legal cap of 8.75%. The increase would also have to be approved by city voters and would only be imposed for one year, generating an estimated $60 million in revenues.
City officials had hoped to seek authorization in a special session planned by Gov. Ann Richards for May, but may try a different tack now that the session has been delayed.
"We might go to the voters first," Mr. Wells said. "If local voters approve of it, the Legislature is not as likely to turn it down."
