Agreement gives ports more leeway to issue bonds

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A new contract between Jobs-Ohio and six port authorities promises to increase funding for real estate and commercial projects across the state.

The private, non-profit economic development corporation is putting $ 50 million in the reserves of five regional bond funds, including programs sponsored by the Cleveland-Cuyahoga County Port Authority and the Development Finance Authority of Summit County.

This agreement, the result of 18 months of discussions, will give ports collective leeway to issue hundreds of millions of dollars in additional bonds.

Premium bond funds provide long-term, fixed rate financing for business expansion and, increasingly, the public infrastructure costs associated with private development.

In northeastern Ohio, for example, the Cleveland and Akron area ports have issued bonds related to headquarters buildings, the Cleveland Cavaliers suburban training center, and frontline projects. urban sea, including the Foundry rowing and sailing complex in the Flats.

To maintain broad investor appeal – and A-minus status with rating agency S&P Global Ratings – bond funds need to maintain a certain level of liquidity. The JobsOhio deal strengthens that cushion, creating up to $ 10 million in additional reserves available for each program.

JobsOhio doesn’t spend any money. Instead, the organization provides credit enhancement – another layer of backup that will allow ports to extend more loans. If bond fund deals go wrong, ports should dip into their own reserves before turning to JobsOhio.

“The risk that we have to make a down payment is extremely low.… We feel pretty good and pretty safe,” said Brian Faust, CFO of JobsOhio.

Other participating ports are the Toledo-Lucas County Port Authority, the Columbus-Franklin County Finance Authority, the Port of Greater Cincinnati Development Authority, and the Dayton-Montgomery County Port Authority. The Cincinnati and Dayton area ports share a bond fund, while the rest of the agencies sponsor stand-alone programs.

Faust described the arrangement as a creative way to use Jobs-Ohio’s track record.

“Our CEOs and executives are interested in ‘What else can we do besides write checks to leverage our capabilities for the state? “”, did he declare.

The Port of Cleveland board of directors signed the agreement in early September, during a meeting at the agency’s downtown office. But the ink on the contract was not dry until the end of last week.

The first such bond fund in Ohio was in the late 1980s, said Michael DiPerna, a Columbus-area financial advisor who worked with each of the ports to establish their programs.

The Port of Cleveland launched its fund in 1997 and has issued more than $ 204 million in bonds for more than 40 projects. The average transaction size is close to $ 4.9 million.

Since its inception about two decades ago, the Akron Region Bond Fund has issued around $ 143 million in debt for projects scattered across the state. The typical deal requires $ 2.5 million to $ 4.5 million in debt, said Chris Burnham, president of the Summit County agency.

“I think JobsOhio sees us as good regional partners,” he said. “And having the extra reserve, the extra capacity, should allow us to do more in our home counties – but maybe more in the counties we haven’t worked in yet.”

The inflated reserves will not change the way the Port of Cleveland evaluates transactions, said Rhonda Winslow, the agency’s chief financial officer. But the partnership with JobsOhio reduces the chances that the port will approach its capacity limit and have to forgo funding for attractive projects.

“I think it does wonderful things for the program and the future of the program,” she said.

The deal with JobsOhio requires ports to maintain their investment-grade ratings, maintain reserves equal to at least 20% of outstanding bonds, and cap individual transactions at $ 11 million.

The contract has a five-year term, with five-year renewal options, according to documents presented to the Port of Cleveland board of directors. If JobsOhio decides not to extend the relationship, the reserves will remain in place for the life of any of the bonds issued during the partnership.

The extra layer of reserves could give each fund the capacity to issue between $ 40 million and $ 60 million in additional bonds. The actual amount is a moving target, determined by the combination of transactions in a particular fund, each port’s internal reserves and other factors.

“Our reserve, in our view, is probably operating something like up to an additional $ 300 million in lending capacity between ports,” Faust said. “And then that $ 300 million lending capacity will be rolled out to projects over time. … It fluctuates over time.”

DiPerna, who advises the six ports, said JobsOhio’s involvement will increase programs at a time when demand from developers is plentiful and attempts to fund public infrastructure, such as parking lots and roads. He thanked the ports for the work they have been doing for decades and the executives at JobsOhio for their interest.

“They were very, very gracious in listening to us and then actually participating. It’s hard to get people to make those kinds of decisions, and it’s a lot of money,” said DiPerna, president of DiPerna Advisors.

He predicted that increasing port surety capacity will spur significant economic growth.

“Our project is sometimes 80% of the funding. Sometimes it’s 10% of the funding. It will have a huge multiplier effect in creating jobs and investment,” he said, “and it just depends the type of project. “


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