San Francisco Selling Bonds for Broken $2.2 Billion Terminal
(Bloomberg) -- San Francisco is such a seller’s market that the city is marketing municipal bonds for a new $2.2 billion transit terminal that’s been shut down for months while crews make emergency repairs to cracked support beams.
The city’s offering of $184 million of taxable municipal bonds Wednesday will finance work at the Salesforce Transit Center, where buses from throughout the Bay Area are supposed to drop off and pick up tens of thousands of daily commuters. The terminal was closed in September, a month after it opened, after crews found cracks in two structural steel beams. There’s still no re-opening date scheduled and the cause of the fissures remains unknown.
The bonds are backed by special taxes levied on the buildings in the district around the regional bus and train hub, formerly known as Transbay. The assessed value of the properties for this fiscal year is more than $3 billion, deal documents show.
Even with the terminal closed, tax collections continue and development is underway on buildings around the facility that would fall under the levy that supports the bond payments. Fitch Ratings ranks the new securities AA+, second highest. The train and bus hub itself doesn’t fall under the levy.
Wealthy California residents seeking tax shelters have helped drive down yields on bonds issued in the state. 10-year California general obligations are yielding just 10 basis points over AAA securities.
San Francisco -- where the assessed value of property has risen by 57 percent in six years -- is seeing "exceptional" demand for its debt, said Tom Lockard, head of investment banking at 280 CapMarkets. He expects investors will snap up the new securities.
From his office window in the City by the Bay, Lockard says he can see busy construction cranes raising buildings all around the terminal. "We can complain about the affordability, but it’s a pretty special place to be here right now in terms of development and progress and Transbay is part of it," he said.
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