Public Finance

Sevier County, Arkansas


In need of a hospital, Sevier County, Arkansas leaned on Stephens to guide it in developing a transaction that would not only put the County in the best financial starting position, but also ensure investors would be willing to participate during these uncertain times.  

Date:                October 22, 2020
Client:              Sevier County, Arkansas
Par Amount:     $24,250,000
Transaction:     Sales and Use Tax Bonds, Taxable Series 2020
Rating:             A (SP-Underlying) AA (SP-AGM Insured)
Role:                Sole Managing Underwriter

Since 2010, over 120 rural hospitals across America have closed leaving many of our nation's most vulnerable populations without timely access to healthcare. One of those hospitals was the De Queen Medical Center in Sevier County, Arkansas, which served southwestern Arkansas’s Sevier County of more than 17,000 residents. With the closest medical facility some 40 miles away, County residents recognized the need to ensure their residents had access to healthcare. As such, the County’s Quorum Court called for a special election, which was held on October 8, 2019 to decide whether to levy a permanent 1-cent countywide sales tax to finance the construction of a 14-bed critical access hospital. Voters overwhelming approved the tax by a margin of 87%.

Then, in early 2020, the global pandemic hit the United States. As it worsened and lockdowns were implemented, investors grew concerned about investing in municipal bonds as it remained unclear how the coronavirus would financially impact state and local governments. In need of a hospital, the County leaned on Stephens to guide it in developing a transaction that would not only put the County in the best financial starting position, but also ensure investors would be willing to participate during these uncertain times.  

To mitigate investor concerns, the County opted to include credit enhancements, such as a cash funded debt service reserve and municipal bond insurance. Additionally, Stephens suggested the County issue taxable municipal bonds in order to provide the County with the flexibility to execute agreements with medical providers without restrictions. The firm also structured the financing to include capitalized interest during the hospital’s 18-month construction period, and then subsequently, “stair step” into the full payment over the next 5-year period. This financing structure gave the County the ability to build up its sales tax collections over a longer period in order to put it in a better financial position.

With this financing structure and the noted credit enhancements, Stephens successfully marketed and sold the $24 million bond issue despite investor concerns around state and local funding. On the day of the offering, Stephens generated $58,310,000 in orders for $24,250,000 in bonds despite concerns about sales and use tax bonds. Strong demand allowed for favorable pricing adjustments resulting in a 3.07% true interest cost.

Since 2016, Stephens has acted as an underwriter on almost 60 local-option sales tax issues with a par amount of more than $1.35 billion. During this time, the firm has consistently ranked as a top ten underwriter in the number of sales and use tax bonds offered in the United States according to Thomson Reuters.[1]   



[1] Source: Thomson Reuters.  Reported period: January 1, 2016 – October 22, 2020.

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