Columbus to put $1.9 billion bond measure on November ballot
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The Columbus, Ohio, City Council approved a November ballot measure seeking voter approval for $1.9 billion of general obligation bonds at its meeting Monday.
“It is the largest bond package in the city’s history, but the city is (at) its largest in history,” said Councilmember Nicholas Bankston, chair of the finance and governance committee, at Monday’s meeting.
Columbus, with more than 900,000 residents, has grown to become the second-largest city in the Midwest after Chicago by population. It has
Bankston noted that the city’s sterling ratings enable it to save “tens of millions of dollars, literally” by issuing GO bonds to finance capital projects.
“We want to point out that since 1956, the city has never issued a (property tax) levy to pay for those bonds,” he said. Instead, it has set aside 25 cents of every income tax dollar to pay for debt service.
The city had about $2 billion in debt outstanding for governmental activities and about $3.6 billion in debt outstanding for business type activities as of last spring, according to Moody’s.
The new bond package includes $500 million for affordable housing.
“We’re making sure that we are making the investments necessary so folks can live, work and play in our community,” Bankston said.
Other
“This bond package ensures we’re not just keeping up — we’re planning ahead, investing in the infrastructure and services that will support our residents today and for generations to come,” said Columbus Department of Finance and Management Director Chris Long.
Long confirmed that the city services non-enterprise debt from
The voted bonding authority from citizens also enables a lower cost of borrowing and lets Columbus stretch its dollars further, he said.
On the affordable housing piece, Long noted affordable housing bonds have previously supported the construction of more than 4,000 rental units in Columbus, including more than 630 units of permanent supportive housing.
“One of the most powerful ways we can address our housing crisis is to get shovels in the ground and build units for Columbus residents struggling with housing instability,” he said. “This bond proposal doubles down on our commitment to drive continued progress.”
Going forward, Long said the city is committed to maintaining its total coverage ratios and ensuring fiscal responsibility in all aspects of its operations.
Fitch affirmed the city’s issuer default rating and outstanding unlimited tax general obligation and limited tax GO bonds at AAA in April 2024. The outlook is stable.
The AAA rating reflects the city’s strong population growth, high midrange budgetary flexibility, high financial resilience and weak long-term liability burden, Fitch said in the 2024 rating report.
It warned that Columbus’ long-term liability composite metric in 2023 was in the 22nd percentile, suggesting a “somewhat elevated” liability burden relative to Fitch’s local government portfolio.
“Columbus’ liabilities to personal income and liabilities to governmental revenue have deteriorated while carrying costs to governmental expenditures remain moderately weak” at 18.7%, or in the 25th percentile, Fitch said.
The city’s strengths offset those factors. Columbus hosts 16 Fortune 1000 companies and five Fortune 500 companies. The metro area has a mix of large and stable employers, including JPMorgan Chase, Honda, Nationwide and Cardinal Health. And it’s benefited from recent investments in semiconductors and financial and healthcare technologies, according to Fitch.
All the rating agencies noted the presence of Ohio State University in Columbus, which they said contributes to the city’s relatively young and educated workforce.
OSU employs about 35,000 people, with the total employment in the city at around 516,000, according to Moody’s, which in April 2024 affirmed Columbus’ Aaa issuer rating, GOULT bond and GOLT bond rating.
“While OSU is exempt from paying property taxes, it does generate income tax and other economic activity,” Coley Anderson, vice president-senior analyst at Moody’s, told The Bond Buyer. “The city has a diverse representation of institutional employment. We expect this will continue, despite some uncertainty surrounding federal grants.”
Anderson also pointed to private investment in Columbus metro area projects from Anduril, a military AI startup; Intel, which has plans,
Moody’s identified as Columbus’ main credit challenges its above-average leverage, which Moody’s put at about 340% of revenue in April 2024, and its associated fixed costs that typically hover between 17% and 20% of revenue.
By the end of fiscal 2024, the city’s long-term leverage was at $9.9 billion and 3.3x fiscal 2024 revenue, down from $11.4 billion and 4.8x revenue in 2021, according to Moody’s.
The city’s total general fund revenues for 2024 were $1.429 billion. Its total general fund expenditures were $1.168 billion, yielding a $260.39 million surplus, according to the city’s
But there was a $310.89 million gap in total governmental funds, driven by overruns in the board of health, debt retirement fund and other governmental funds.
“The city limits negative budgetary variances by tracking income tax refunds, migration trends and job growth from a variety of sources to better forecast revenue,” Anderson said.
Moody’s said it believes the city’s financial operations — 75% of which are funded from governmental revenue — will stay strong “because of proactive budget management and an established history of resiliency during downturns.”
It would take a lot to dent Columbus’ bond ratings, said Ben Gallovic, a director at S&P.
“Rating pressure hinges on multiple credit factors, such as a drastic economic slowdown leading to comparatively weaker economic metrics, a material and sustained decline in reserves and liquidity, and unsustainable growth in liabilities and fixed costs,” he said.
As for the impact of changing White House policies on Ohio State and Columbus itself, Gallovic said there is some risk, but it is tempered by the city’s strong financial position.
“It depends on the duration and extent of federal policy changes,” he said. “Columbus has a large and diverse economy that extends beyond Ohio State, as well as very strong reserves, both of which provide short-term cushion against potential federal policy changes.”
At the same time, Gallovic said, the presence of Ohio State has helped spur a lot of industry growth in the city, particularly in financial technology, life sciences and health care, and information-technology-related sectors.
“If federal policy changes have negative impacts on the university, it could temper long-term economic growth,” he said.
