City bonds went on sale Monday for the $540 million multipurpose Dickies Arena under construction at the Will Rogers Memorial Center.
Fort Worth and Texas residents can invest in the bonds, Series 2017A and Series 2017B, before they are offered to institutional investors on Tuesday, said Aaron Bovos, the city’s chief financial officer.
During the “retail order period,” residents will be allowed to buy bonds in $5,000 increments, up to $500,000 each. Buyers will be able to select a date when they want their investment paid back, starting from March 2021, and decide if they want taxable or tax-exempt bonds, Bovos said.
Our goal through the retail order period is really to begin to bridge the financial transactions that we’re doing with the opportunity for the community to participate.
Aaron Bovos, Fort Worth’s chief financial officer
“Our goal through the retail order period is really to begin to bridge the financial transactions that we’re doing with the opportunity for the community to participate,” Bovos said.
City officials have contemplated selling bonds to the general public since the 2014 bond program. During public meetings then, many people asked how they could buy the city’s debt, he said. Until now, city bonds were only offered to the big institutional investors, such as pension funds and insurance companies.
“We didn’t have a mechanism in place at that point in time to offer our debt to individuals in the community,” Bovos said.
Now it does, and city leaders feel the arena project, which will be the centerpiece venue for the Fort Worth Stock Show and Rodeo and other events, is a good place to start.
The city is issuing the debt to cover its portion of the construction costs, which is capped at $225 million, as well as to fund other work planned for the cattle barns, an air conditioning system and technology upgrades at Will Rogers.
The City Council recently authorized the sale of nearly $240 million in bonds.
The remaining construction costs are being paid by Event Facilities Fort Worth, the city’s private partner on the project, which is overseeing construction and its operations. Construction began a couple months ago.
Bond credit rating firm Fitch has rated the bonds AA+, and they are rated A1 by Moody’s Investor Services. The debt is mostly backed by a hotel occupancy tax and taxes collected on parking, tickets and stall fees.
City officials are anxious to see what the response to the sale will be, but they don’t expect to sell out the first day.
“We may have no orders, we may have thousands of orders. We’re happy with wherever it goes,” Bovos said.
Fort Worth is among a growing number of municipalities to first offer their bonds to their citizens.
A lot of progressive cities are starting to do this.
John Samford, Fort Worth’s assistant finance director
Earlier this year, Cambridge, Mass., offered its citizens the chance to invest in “minibonds,” to finance new streets and city facility upgrades. They were sold in $1,000 increments.
Lawrence, Kan., city officials offered “minibonds” to its citizens for the first time in a $654,000 bond program to buy a new fire truck, according to reports.
Burlington, Vt., has been offering its citizens investment opportunities on its bond programs for many years.
“A lot of progressive cities are starting to do this,” said John Samford, the city’s assistant finance director.
Fort Worth and Texas residents will have priority on the first day of the offering, but they’ll be placed among the other investors on the second day, Bovos said.
As with all investments, there are risks involved.
On June 19, interested residents will call one of the four underwriters the city works with, or they can choose to have their own broker handle the deal. The city works with J.P. Morgan, Citigroup, Loop Capital Markets and Wells Fargo Securities.
Investors will need an account with one of the underwriters and everything will be done electronically, Bovos said.
At the end of the maturity, the investor will get their principal back. Interest will be paid in March and September, starting in 2018.
Sandra Baker: 817-390-7727, @SandraBakerFWST