Featured Municipal Bond Issue: – Indianapolis Local Public Improvement Bond Bank to Issue $610.5 Million Justice Campus Bonds for Courthouse & Jail Complex
Our featured new issue municipal bond of the week is the Indianapolis Public Improvement Bond Bank, which is scheduled to bring to market an estimated $610.5 million Community Justice Campus bond issue. The bonds will be used to finance the purchase of a lease rental revenue bond issue issued by the Indianapolis-Marion County Building Authority. The Bond Bank will market the Community Justice Campus Bonds as a public offering by a negotiated sale scheduled for the week of March 18, 2019.
In a relatively complicated financing arrangement, but not unusual under Indiana law, the Indianapolis Public Improvement Bond Bank will purchase the Indianapolis Public Improvement Bond Bank Community Justice Campus Bonds (Courthouse and Jail Project) Bonds, Series 2019 , which is a qualified obligation bond issue from the Indianapolis-Marion County Building Authority. The Building Authority will lease the Project to the City of Indianapolis and Marion County through separate leases. Under Indiana law, the financing of this type of lease obligation are subject to abatement if the project is not available for occupancy by not annual appropriation.
The City and County are positioned to enter into the leases with the Building Authority to finance the Courthouse and Jail project by virtue of a November 2018 Resolution adopted by the City-County Council of Indianapolis and Marion County in November 2018. The lease term and lease payments are structured by the City-County resolution to not exceed 40 years beginning once the Courthouse Jail Project is complete and ready for occupancy.
Bond proceeds for the Series A Bonds will be used to purchase the qualified obligations of the Indianapolis-Marion County Building Authority, refund certain Indianapolis Local Public Improvement Bond Bank Notes, fund a Bond Bank debt service reserve fund and a Revenue Stabilization Fund, provide capitalized interest and pay costs of issuance. The capitalized interest account is designed to pay interest through April 1, 2022.
The project being financed by the Building Authority is intended to construct a multi-purpose campus consisting of (1) a modern new county detention that will provide 2,700 general population beds and 300 specialty beds for inmate education, job training, counseling and other program that will replace existing County processing and jail facilities; (2) a consolidated county courthouse and (3) a new assessment and intervention center, that will be financed through a separately secured Series B bond issue for the Assessment and Intervention Center Project in the amount of $12, 570,000. The Series B bonds are not otherwise discussed as part of the Featured Bond in this commentary.
The Series A Bonds, which are for the courthouse and jail project are payable from and are secured by lease rental payments backed by legally and irrevocably dedicated local income taxes pledged by the city. The County Treasurer will transfer directly to the bond trustee specified monthly amounts intended to cover the monthly maximum annual lease rental payment due under the 2019 A lease. The City-Council Council resolution that enabled to the project has covenanted not to take certain specific actions that would negatively impact the local income tax revenues while the bonds are outstanding.
The Series A Bonds are scheduled to be brought to market by an underwriting group led by Bank of America Merrill Lynch, the lead senior underwriter, and UBS Financial Services Inc., the senior co-manager.
The Series 2019 A Bonds are federally tax-exempt in the opinion of Bond Council and are to be rated Aa1 by Moody’s and AAA by Fitch.
Principal is expected to be structured for annual serial bond repayments beginning in 2023 and ending in 2039 and three term bonds in 2044, 2049 and 2054 (schedule subject to changes at the final confirmation of the sale).
Details on the purposes, tax-status, security, as well as other matters and risks pertaining to these Indianapolis Public Improvement Bond Bank Community Justice Campus Bonds can be found in the preliminary supplemental official statement (register on the MuniOS website).
After registering, visitors can link direct to the preliminary supplemental official statement as well as a Roadshow Presentation regarding this bond issue by searching for the Indianapolis Public Improvement Bond Bank Community Justice Campus Bond on the MuniOS website.
About the city of Indianapolis and Marion County
The city of Indianapolis and Marion County became a consolidated city-county government in 1970. The local income tax provides the backing for the Series A lease rentals, which are derived from County taxpayers. The current local income tax rate is 1.97% of which 1.72% is pledged. The maximum allowable income tax rate is 2.75%. In 2019, the city/county projected share of the certified distribution amounts to $336 million.
Marion County encompasses 402 square miles and has a population of 950,000 persons.
According to the Bureau of Labor Statistics, Indianapolis (as of December 2018) has an unemployment rate of 3.3%, which is .4% lower than the national rate for the same time period.
Provided below (click to expand) is a chart showing the combined historical local income tax revenues of both the City of Indianapolis and Marion County as presented in the Series 2019 Preliminary bond official statement.
Merritt has many of the sector medians publicly available and regularly updated on their Benchmark Central page. (Merritt Research believes the data to be reliable but does not make any representations as to its accuracy or completeness. Calculations provided by Merritt may differ from those provided by the issuer due largely to standardized formula approaches used by Merritt Research.)
Disclosures and Disclaimers
These facts and numbers are for informational purposes, and should not be considered complete or an official disclosure for potential investors. Potential Investors should rely only on the official documents and figures provided in the official statement (prospectus). The official statement can be found on the website MuniOs.com. None of the information provided should be construed as a recommendation by MuniNet Guide, MuniNet LLC, or any of their employees.
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.