DALLAS -- Already the most prolific Texas issuer this year, San Antonio returns to the market tomorrow with a $44.2 million taxable refunding of tax-exempt certificates sold to help finance the Alamodome stadium.

"After the dome refunding, we are done -- for this year," said city Finance Director Nora Chavez. "All the refundings for the city have gone extremely well."

The six issues the city has already marketed this year account for $1.8 billion of the $13 billion-plus of Texas volume.

Dallas-based Rauscher Pierce Refsnes Inc. will underwrite the latest deal. The selling group, which includes co-managers Howard Gary & Co., Southwest Securities Inc., and J.M. Williams Inc., on Tuesday expects to price $18.7 million of certificates maturing Nov. 1, 1993, and $25.5 million maturing in 1994.

The proceeds will be used to refund tax-exempt certificates of obligation sold beginning three years ago.

The 1989 certificates will be refunded on a current basis and will be called at par on Dec. 1. The 1990 debt will be advance refunded and called at par on May 1, 1993.

City officials said they must use taxable debt because the tax code now does not allow sports stadiums to be financed with tax-exempt bonds.

The project was initially able to use interim tax-free financing for the project because of a congressional rifle shot that grandfathered the project from the Tax Reform Act of 1986, which banned such projects.

By refunding tax-exempt bonds with short-term taxable debt, underwriters expect to price the new certificates in the 4% range, 200 basis points below the rates on the outstanding tax-exempt debt.

"Even at the taxable rates, we can save $800,000 to $1 million," said Jim Seal, executive vice president and manager at M.E. Allison & Co. in San Antonio, the city's co-financial adviser. "We're catching the market while it's low."

He said that on a present value basis, the savings could total just under 2%.

Jorge Rodriguez, first vice president at Masterson Moreland Sauer Whisman Inc., the other co-financial adviser, said strong revenues are expected to be available before the final maturity in two years.

"We anticipate we'll be able to pay off all the bonds on April 1, 1994," he said. "That will make the project debt free."

The city sold the bonds as interim financing for the $181 million downtown Alamodome sports stadium.

Most of the project costs have been paid with current revenues generated by a half-cent sales tax collected by the regional VIA Metropolitan Transit agency.

In a Jan. 21, 1989, election, voters approved a five-year half-cent sales tax that last year generated $38 million in revenues. The tax automatically expires in March 1994, one year after the taxable refunding bonds are expected to be retired.

Because of the unusual arrangement that tapped a transit sales tax to build a sports stadium, some in the Texas bond community have jokingly referred to the project as "the Alamodome and downtown bus stop."

The bonds also have the backing of city funds. Under a leasehold agreement, San Antonio will operate the facility under a 99-year agreement with the transit agency. Officials said the sales tax revenues are strong enough to ensure that city funds are not needed to make debt service.

Still, because of the city backing, the bonds are expected to carry ratings that mirror San Antonio's own double-A rating. Fitch Investors Service has already assigned that rating to the stadium bonds.

The transaction is the latest in what has been the busiest year ever for San Antonio, the nation's ninth largest city, as it has refunded large blocks of debt to take advantage of market conditions.

Just last week, the city refunded $24.8 million of airport revenue bonds. That is small compared with record-setting deals such as a $700 million refunding of electric and gas system revenue bonds in August, which came just two weeks after a $400 million GO issue. The city's second largest deal was a $635.9 million water revenue refunding sold in April.

As for 1993, Chavez said the city is likely to sell a $25 million new-money general obligation deal as city officials discuss seeking a new GO bond authorization from voters.

She said the refundings have enabled the city to create about $75 million in debt capacity without materially affecting the property tax rate even as assessed valuations have declined. But even the dropping values may be reversing, Chavez said, adding, "I think we have seen the bottom."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.