Birmingham has refinanced $179 million in general obligation debt, securing the lowest interest cost for the city in decades and accruing $44 million in present value savings from bond refunding. [mfn referencenumber=*]Correction: An earlier version of this story said that Birmingham filed one of the largest municipal bankruptcies in U.S. history. Birmingham has never filed for bankruptcy. However, Jefferson County was involved in one of the largest municipal bankruptcies in U.S. history. The headline also said Birmingham paid off the debt. It has refinanced the debt.[/mfn]
“When I became mayor in November 2017, it became apparent the city was not on sound financial footing,” said Mayor Randall Woodfin. “A key reason was the city was not paying into its pension at the level that was needed. Today, we have dramatically increased our payment to the pension. I want to thank the council for their support in this effort. We have reduced the cost of borrowing money and have strengthened our financial position.”
Bond refunding reduces the payments for debt service in the general fund by upward of $5 million per year for the next five years, allowing $13 million in real cash savings for commercial development use in the future.
Stifel served as senior bookrunning manager for the issue and led the structuring of the financing, as well as the sales and underwriting.
Based on number of issues sold, Stifel is the leading underwriter in the country and has a major presence in the State of Alabama.
Birmingham has now nearly doubled its contribution to its pension fund since the 2017 fiscal year.
The city’s commitment to increasing its pension funds, coupled with a focus on maintaining services and infrastructure during the COVID-19 pandemic has generated confidence in the city’s finances among rating agencies.
Four credit rating agencies — S&P, Moody’s, Fitch and KBRA — reaffirmed the city’s current ratings. A downgrade could have cost the city millions of dollars during the recent bond refunding and created bigger challenges for the operating budget.
Birmingham’s Porter White & Company and Atlanta’s Terminus Municipal Advisors LLC served as municipal advisors for the city during the refunding phase.
