Paul Bass Photo
A little-known government committee reviews bids.
In New Haven, some people heard alarm bells. In the bond market, underwriters heard opportunity knocking — so six of them lined up for the chance to buy bonds from the city.
The six underwriters competed Wednesday for the chance to buy $44.5 million in general obligation bonds from the city. TD Securities New York came in with the lowest bid — a 3.842976 percent “true interest” rate over 20 years — and won the deal.
Visiting financial experts from Philadelphia-based Public Financial Management (PFM) joined city officials in City Hall Wednesday morning to crunch the numbers and pick a winner. A little-known city body called the Bond Sale Committee (a partial successor to the now-defunct Board of Finance) approved the selection.
In the days leading up to Wednesday’s meeting Democratic mayoral candidate Clifton Graves called for a moratorium on bond sales because of a report issued by Moody’s Investor Services lowering the city’s financial “outlook” to negative. Graves said the city can’t afford to borrow more money; the city said its bond rating has remained consistent and the projects covered by the sale — ranging from school construction and Downtown Crossing to police computers — are valuable uses of the money.
The actual sale Wednesday morning was a more subdued, less contentious affair, concluding with a unanimous vote by the Bond Sale Committee. Click on the play arrow to watch the vote as Mayor John DeStefano chaired.
The last time the city sold bonds, in March, it had to pay more interest: 4.15 percent.
An industry analyst called the low interest rate New Haven obtained Wednesday a bargain, a chance to take advantage of favorable market conditions; and he called the emergence of six bidders a vote of confidence in the city’s financial condition.
“Six bids is a lot. You should be pleased with the results,” said the analyst, James Redd of Baltimore-based Municipal Resource Advisors (who had no role in the bond sale). “Six underwriters bidding on a deal this size [means] the city enjoys a strong reputation.”
With so much money at stake, the actual sale is a notably low-key affair. It began at 10:30 inside the Mayor’s Conference Room in City Hall. City-hired experts from Robinson & Cole (New Haven’s bond counsel) and from PFM, who traveled from Philadelphia Tuesday and spent the evening at the Omni, gathered around the conference table to see which underwriters offered bids, and how much.
No one ran into the room waving bid sheets. No one even phoned in last-minute offers or faxed in bids, as used to happen at these bond sales.
Instead, the PFM crew consulted a dedicated web program called Parity, where underwriters entered their bids.
Then Trina Smith of PFM (pictured) plugged information from the bids into an Excel spreadsheet on her laptop. She doubled-checked the bidders’ calculations to verify their “All-in TICs,” or True Interest Costs. That’s the key number on which the bond competition is based: the annual average of the interest rates being offered over the 20 years (they fluctuate), with servicing costs thrown in, as well as an up-front premium the bidders pay (in this case $2.5 million).
The numbers added up. The PFM crew subsequently printed out the six bidders’ TICs, brought them across the hall to Mayor DeStefano’s office, and distributed them to other city finance officials gathered around the table.
“It’s ridiculously low for 20-year bonds,” Robinson & Cole’s S. Frank D’Ercole said of the 3.84 percent TIC. “Rates are at historic lows. [The city is] paying very little to borrow this money.”
Newhallville Alderwoman Katrina Jones got her print-out as she arrived in time for the 11 a.m. beginning of the formal meeting of the Bond Sale Committee, on which she and the mayor sit along with Acting Controller Mike O’Neil and other members of the Department of Finance. DeStefano convened the meeting, called for a vote on the $44.5 million of capital projects covered by the sale, then another vote on approving TD Securities’ bid. Both measures passed unanimously with no discussion. Meeting adjourned.
Though most New Haveners may not have heard about it, and its meetings usually go unreported, the Bond Sale Committee technically serves a function like that of the State Bond Commission, which approves the sale of bonds to cover capital projects already approved by the legislature. The state commission’s meetings receive intensive attention. That’s because its votes are often in doubt, and cities and towns have millions of dollars riding on the outcome. The governor controls the commission and sometimes uses that leverage to cancel pet projects approved by legislators or get credit for rescuing them. By contrast, New Haven’s committee generally defers to the Board of Aldermen’s decisions about what projects to fund.
“A lot of this is jobs,” DeStefano said of the projects covered under the sale. They include:
• New Haven’s share of 12 rebuilt schools, including Betsy Ross Arts Magnet School, $1.517 million (out of a total $69 million); new Hooker, $3.343 million; Hillhouse Phase II, $8.667 million; Beecher School, $1.028 million.
• The city’s $6.5 million match of a federal “TIGER” grant to start filling in the Route 34 Connector, reconfigure roads and plop in a new medical-tech building as part of the “Downtown Crossing” project.
• $3.5 million toward the West Rock projects redevelopment.
• $1.1 million for new recycling toters for parts of the city that haven’t yet received them.
• $100,000 for ammunition, $100,000 for “body armor,” and $120,000 for computers for city cops.
• $630,00 for “apparatus replacement & rehabilitation,” $100,000 for protective equipment, $40,000 for rescue equipment, and $35,000 for emergency medical equipment for firefighters.
• $775,00 for “Complete Street Construction,” $650,000 for sidewalk replacements, and $150,000 for bridge upgrades.
• $230,000 for the Farmington Canal Greenway.
• $300,000 for airport improvements.
• $550,000 for parking meters.
Here are the “All-In TICs” submitted by Wednesday’s bidders:
• TD Securities New York 3.842976.
• Raymond James & Associates Inc. 3.945556.
• Banc of America Merrill Lynch 3.997046.
• Hutchinson, Shockey, Erley ‡ Co. 4.019590.
• Piper Jaffray 4.1555137.
• Wells Fargo Bank, National Association 4.219841.