Featured Bond – Week of April 8, 2019: The City of Houston’s $115 Million Hotel Occupancy Tax and Special Revenue and Refunding Bonds
Houston is issuing $115 million Hotel Occupancy Tax and Special Revenue and Refunding Bonds Series 2019 through its Convention and Entertainment Facilities Department. The scheduled pricing date for the negotiated sale is Tuesday April 9. The proceeds will be used to refinance the City’s Outstanding Hotel Occupancy Tax and Special Revenue and Refunding Bonds Series 2001C-1 and 2001C-2, and to finance capital projects including renovations to the Hilton-Americas hotel.
The bonds and federally tax-exempt and non-AMT. The bonds will be payable and secured from the collection of Hotel Occupancy Taxes from hotel rooms across the City and certain revenues from Parking Facilities.
About the City
In 2017, the estimated population of Houston was 2.3 million. For reference, the estimated population in 2000 was 1.95 million and 2.1 million in 2010. The nine-county Houston-the Woodlawns-Sugar Land MSA had an estimated 2017 population of 6.89 million. Houston is the largest city in Texas and fourth largest city in the United States. Houston has experienced robust job and population growth over the last few years. The City is known as an energy hub and has over 3500 companies in this sector. Houston also is a hub for medical fields and aerospace work. Houston has a higher unemployment rate than both the State of Texas overall and the US as a whole. This has been the case for the last few years.
Houston First Corporation operates and maintains the City’s convention and performing arts facilities and promotes tourism. Their assets include Hilton-Americas Houston, George R. Brown Convention Center, Wortham Theater Center, Theater District Parking Garages, Partnership Tower, and more.
Eligible Projects for a portion of the proceeds of these bonds will go towards renovations to the Convention Center, the Hilton Americas, the Theater District Parking Garages, Jones Hall, the Wortham Theater, Miller Outdoor Theater, and improvements to Houston First Corporation’s information technology. One major renovation project will be a $37 million renovation of all 1200 rooms in Hilton-Americas. Hilton-Americas was the top Hotel Occupancy Taxpayer for fiscal year 2018 in Houston.
Security for the Bonds
The Bonds constitute special limited obligations of the City that are payable solely from and secured equally and ratably by pledged revenues including Hotel Occupancy Tax (HOT) and Parking Revenues. Note, the bonds are not a general obligation of the City. The City covenants that it shall continue to levy, for so long as the Series 2001 Bonds are outstanding, the City HOT at a rate no less than 7%, with the pledged HOT equal to 5.65%. The pledged parking revenue come from parking garages in the City’s Theater District totaling over 4000 spaces.
The following special funds and accounts have been previously established by the City, and shall be maintained and accounted for so long as the Bonds and other Parity Bonds remain Outstanding:
- Revenue Fund, which shall contain:
- the Pledged Revenue Account,
- the General (Non-Pledged) Revenue Account, and
- the Operation and Maintenance Account which shall contain the Convention Registration and Advertising Account;
- Interest and Sinking Fund;
- Reserve Fund; and
- Convention and Entertainment Development Fund, which shall contain the Renewal and Replacement Account.
According to the bond prospectus, the bonds are rated A by S&P Global Ratings Group and A2 by Moody’s.
These details and more on purposes, security, risks and other matters pertaining to these City of Houston Dept. of Convention and Entertainment Facilities bonds can the found in the official statement, provided by MuniOS. After registering, if one has not already, visitors can link directly to the official statement as well as an investor’s roadshow by searching for the City of Houston.
The featured Houston bonds being featured are not secured by a general obligation pledge of the city or any other entity. Their source of payment pertains only to the specific pledged taxes and fees. The general revenues of the city are not pledged.
Provided below is a quick snapshot of the overall financial characteristics of the City of Houston along with the medians for other cites of all sizes, courtesy of Merritt Research Services, LLC. Merritt has many of the sector medians publicly available and regularly updated on their Benchmark Central page. (Merritt believes the data to be reliable but does not make any representations as to its accuracy or completeness). These statistics are provided for background information only and may be only indirectly relevant to repayment potential for the Convention and Entertainment bond issue.
Statistical Snapshot of the City of Houston: Selected Financial and Economic Indicators
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.