City of Hartford, CT
$237,415,000 | City of Hartford, CT | General Obligation Refunding Bonds | Series 2013
During a meeting in December 2012, MRA learned the City was facing the inability to make its Police and Fire Pension Fund contribution for the fiscal year ending June 30, 2013 as well as projected deficits for the next three fiscal years. Armed with this information, MRA performed a comprehensive analysis on the City’s debt portfolio looking for opportunities to provide debt service relief.
Historically, the City had employed a level ‘principal amortization’ structure with a 20-year final maturity under a conservative approach to debt issuance. Under a level principal approach, the resulting debt service profile is one that becomes heavily front loaded (due to the high interest payments associated with the outstanding principal) and falls off in the later years (as principal amortizes down, the resulting interest diminishes). The existing debt profile presented an opportunity to move certain maturities from the ‘front’ of the profile and ‘fill in’ the back of the profile.
In January 2013, MRA met with the City Treasurer and Finance Director and presented the following unsolicited idea: execute a restructuring of the General Obligation credit to create debt service relief in each of the next five fiscal years totaling over $53.7M. The weighted average maturity of the General Obligation portfolio only increased by 5.7 years and showed the City was not extending debt to create debt service relief. Thus, the rating agencies were comfortable with the new weighted average maturity and confirmed the City’s ratings for this transaction at the ‘A’ level thereby allowing the City to restructure its General Obligation credit and realize $53.7M in debt service savings between FY2014 and FY2018.