Franklin County Refinances $138.2M in Bonds to Restructure Debt and Mitigate Risks

Franklin County, Ohio, is set to issue $138.2 million in lease revenue anticipation refunding bonds through the Franklin County Convention Facilities Authority. The proceeds will be used to refund or redeem outstanding Build America Bonds, consolidate existing rental reserve and debt service reserve funds, and cover issuance costs.

Unlocking Savings and Reducing Risks for Franklin County's Convention Facilities

Refunding Outstanding Build America Bonds

Franklin County's Convention Facilities Authority is taking advantage of current market conditions to refinance its outstanding Series 2010 Build America Bonds (BABs). The $160 million in Series 2010 BABs were originally issued to finance the construction of the Hilton Columbus Downtown hotel and fund a bond reserve. The new Series 2024 refunding bonds will be used to pay off the remaining principal on the Series 2010 BABs.The decision to refinance the BABs is driven by the declining federal subsidy on the interest rates paid to investors. When the BABs were first issued, the federal government provided a subsidy to issuers to offset a portion of the interest costs. However, due to federal budget sequestration, this subsidy has fallen short of the original promises since 2013. By refinancing the BABs, Franklin County can eliminate the risk associated with the unpredictable federal subsidy and lock in more stable debt service payments.

Consolidating Rental Reserve and Debt Service Reserve Funds

In addition to refunding the outstanding BABs, the Series 2024 refunding bonds will also be used to consolidate the existing rental reserve and debt service reserve funds into a restructured rental reserve fund. This streamlining of the reserve funds will provide greater flexibility and efficiency in managing the county's convention facilities debt obligations.The restructured rental reserve fund will be stocked with the proceeds from the refunding, ensuring that adequate reserves are in place to support the debt service payments. This consolidation of the reserve funds will simplify the overall debt structure and enhance the county's ability to manage its convention facilities financing.

Optimizing Debt Service and Redemption Provisions

The Series 2024 refunding bonds will feature an optional redemption provision on December 1, 2034, allowing Franklin County to call the bonds at par. This flexibility provides the county with the opportunity to potentially refinance the debt in the future if market conditions become more favorable.Additionally, the refunding will result in a nearly identical debt service profile through 2032, with a portion of the principal being deferred to the 2033-2042 period. This debt service structure ensures that the county's annual obligations remain manageable and aligned with the expected revenue streams from the convention facilities.

Maintaining Strong Credit Ratings

The Series 2024 refunding bonds have been assigned strong credit ratings from both Moody's and S&P Global Ratings. Moody's has rated the bonds Aa2 with a stable outlook, while S&P has assigned an AA rating with a stable outlook.These high-grade ratings reflect the county's commitment to the convention facilities, as well as the appropriation pledge from the Franklin County Board of Commissioners. The ratings also consider the "less essential nature" of the convention center hotel project, as noted by Moody's, and the ongoing impact of the COVID-19 pandemic on hotel revenues.

Governance and Oversight of the Convention Facilities

The Franklin County Convention Facilities Authority, which owns and manages the county's convention facilities, is governed by an 11-member board. Six members are appointed by the county, three by the city of Columbus, and two by suburban mayors. This diverse representation ensures that the interests of the broader community are taken into account in the oversight and decision-making processes.The authority's portfolio includes the Greater Columbus Convention Center, the Hilton Columbus Downtown hotel, Nationwide Arena (home to the Columbus Blue Jackets), and six parking facilities around the convention center. The careful management and strategic development of these assets are crucial to the long-term success of Franklin County's convention and hospitality industry.