Ballard Spahr attorneys assisted in closing a landmark multimillion-dollar "public-public partnership" transaction for the Lehigh County Authority (LCA) that has been named co-winner of The Bond Buyer's Northeast Region Deal of the Year Award. The transaction is among the first successful public-public partnerships for a major utility in the United States.

The deal involved $307 million in water and sewer revenue bonds, the proceeds of which were used to negotiate a 50-year concession of the City of Allentown water and sewer system. It included an upfront payment of $220 million and annual payments of a half million dollars to the City of Allentown. The transaction used a creative financing structure to help LCA secure the winning bid and help bring financial stability to the City of Allentown, which had been facing an unfunded pension liability of more than $160 million.

Ballard Spahr represented Goldman, Sachs & Co., which underwrote the $307 million bonds. The bonds were issued on a tax-exempt and taxable basis as a new credit. They were entirely separate from LCA's existing credit and operations and backed solely by a lien on the net revenues of the Allentown System (backed by the Concession). LCA and Goldman Sachs structured and issued the bonds during a period of significant interest rate fluctuation, but were able to restructure the bonds to minimize the impact of rising interest rates and to match shifting investor demand. This structure, coupled with the comprehensive investor outreach program provided by LCA and Goldman Sachs, helped garner investor participation from more than 20 institutional investors from a dozen states.

"This transaction represents an exciting innovation in problem-solving for municipalities facing budgetary shortfalls," said Brian Walsh, Practice Leader of Ballard's P3/Infrastructure Group. "Equally important, the deal was structured in a way that provided an overall operational benefit to the city and its residents." In addition to Mr. Walsh, the Ballard Spahr team included partners Kevin R. Cunningham and Charles S. Henck and associates Steve L. Park and Kimberly D. Magrini.

As winner of the regional award, the transaction will now be measured against winners of other regional and topical categories for the National Deal of the Year Award, which will be announced at The Bond Buyer's 12th Annual Deal of the Year Award Ceremony on December 5 at the Waldorf Astoria in New York.

"The transition of the water and sewer system from the City to the LCA was seamless, thanks for the LCA's strong management team and technical expertise," Mr. Walsh added. "And, thanks to the terms of the concession, existing City employees kept their jobs, allowing the LCA to provide quality service and continuity to the System's customer base."  

Related Practices

Public Finance