Los Angeles County last Wednesday priced $1.965 billion of taxable pension obligation bonds -- the municipal market's second-largest long-term offering ever, and the largest long-term offering that the market's taxable sector has seen.

Proceeds went to funding the county's unfunded accrued actuarial liability for the $14 billion retirement fund of the Los Angeles County Employee Retirement Association, which has about 100,000 active and retired members.

The bonds were rated A by both Standard & Poor's Corp. and Moody's Investors Service.

The issue included $1.116 billion of Series 1994A current-interest bonds, with maturities ranging from 1996 to 2006, and coupons ranging from 6.80% to 8.62%. Certain bonds received credit enhancement from AMBAC Indemnity Corp.

The offering also included $600 million of Series 1994D select auction variable-rate securities, which will employ a Dutch auction procedure to set the interest rate to current market levels every 35 days. The securities were insured by Municipal Bond Investors Assurance Corp.

A total of $248.395 million of the issue was structured as Series 1994C capital appreciation bonds, of which certain series were also insured by MBIA.

The bonds were legally structured as refunding bonds and do not represent a new-money obligation of the county. They are subject to the federal income tax but not California personal income taxes.

The bonds were purchased through negotiation by a 15-member underwriting syndicate headed by senior manager Lehman Brothers. The bonds were offered in the global taxable market, and the fixed-rate portion was listed on the Luxembourg Stock Exchange.

"The successful marketing of this issue required the underwriting team to effectively introduce a California local government to the global community of corporate and sovereign bond investors -- a unique credit presentation of a complex taxable structure," Lehman senior vice president James H. Gibbs said in a statement.

-- Brad Altman, Los Angeles

Los Angeles County supervisors last Friday dropped a plan to create a countywide Mello-Roos district that would be empowered to collect fees to fund public libraries.

Supervisors agreed to allocate $22.5 million in surplus general fund revenues to pay for library services as a one-time remedy to a library funding shortfall for the fiscal year that began July 1.

The supervisors agreed to reconsider impiementing the Mello-Roos fee next year, even though a suit filed by the Howard Jarvis Taxpayers Association argues that the fee is a tax and is therefore illegal without voter approval.

The funding will enable 87 county branch libraries, many of which had been open only two or three days a week, to return to daily operating schedules.

The Mello-Roos special charge would have been levied on property owners in unincorporated areas of the county and in 16 cities that had agreed to participate. The annual levy would have been as much as $26.50 for home owners, and several hundred dollars for commercial and industrial businesses.

-- Brad Altman

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