Charlotte City Council to Vote on $400M Bond Deal Led by Wells Fargo

The Charlotte, N.C., City Council will vote today on whether to tap the municipal bond market for more than $400 million, using a dual-pronged strategy that combines long-term refinancing with a flexible short-term credit facility to fund voter-approved urban projects. City documents outline two actions: a public offering of more than $200 million in refunding bonds and a private placement of a $200 million variable-rate note.

The first component of the plan involves the issuance of up to $201,510,000 in General Obligation Refunding Bonds, Series 2025B. The proceeds will be used to refund the city’s Series 2023C Bond Anticipation Note (BAN) program, effectively converting short-term construction financing for transportation and neighborhood improvements into long-term, fixed-rate debt. This is a standard practice for municipalities seeking to lock in rates as projects near completion. The bonds will be sold in a negotiated offering led by managing underwriter Wells Fargo Bank, National Association, with J.P. Morgan Securities LLC and Academy Securities Inc. serving as co-managers. The debt is scheduled to mature in installments from 2026 through 2045 and is secured by the city’s full "faith and credit" pledge, backed by its taxing power.

Concurrently, Charlotte is establishing a new $200,000,000 short-term financing facility, designated as General Obligation Bond, Series 2025C. This instrument, structured as a "draw program," will be sold directly to PNC Bank, National Association, in a private sale. The city considers this approach a financial best practice that lowers the cost of capital for taxpayers during the construction phase of new projects authorized by voters in 2020 and 2022.

Key terms of the PNC Bank facility include:

• Variable Interest Rate: The bond will initially bear interest at a variable rate based on the Daily Simple SOFR (Secured Overnight Financing Rate) benchmark.
• Draw-Down Structure: Instead of receiving the full $200 million upfront, the city will request funds, or "Advances," as project costs are incurred. The program terminates and no further advances can be made on the "Advance Termination Date," which is the third anniversary of the bond's issuance.
• Mandatory Prepayment & Amortization: The city is required to prepay the bond in full on its third anniversary, known as the "Full Funding Date". However, if no default has occurred and other conditions are met, Charlotte has the option to repay the outstanding principal in 36 equal monthly installments over a subsequent three-year "Amortization Period". During this period, the interest rate would shift to a higher "Term Loan Rate".

To assure investors and meet regulatory requirements for the public offering, Charlotte has committed to ongoing disclosures under SEC Rule 15c2-12. This includes providing annual audited financial statements within seven months of its fiscal year-end and issuing timely notices of material events such as rating changes, defaults, adverse tax opinions, or defeasances. The private placement with PNC Bank also includes covenants, such as a requirement to furnish the bank with annual audited financial statements and strict restrictions limiting the bond's transfer to other qualified institutional buyers.