The volume of municipal transport in the South-West increases by 29.8% in the first half of 2024

Municipal bond issuance in the Southwest jumped 29.8% to $50.6 billion in the first half of 2024, with Texas accounting for 65% of the volume amid a deluge of education sector debt.

After a declining first quarter, issuance in the region increased 60.3% in the second quarter compared to the same period in 2023, according to LSEG Data & Analytics, formerly Refinitiv. Nearly 21% of the national volume, which climbed 32.3% to $242.16 billion during the first six months of this year, was sold by the South-West transmitters.

Volume increased in most of the region’s eight states, with only Arkansas and New Mexico falling below mid-year 2023 levels. The education sector, which accounted for the lion’s share of the region’s debt sales at $22.45 billion, increased 44%. Revenue bond issuance slightly outpaced general obligation debt sales.

In Texas, bond sales rose 19% year over year to $33.14 billion, less than California’s nearly $36.1 billion but more than New York’s $28 billion, keeping the Lone Star state in contention for the crown of the year’s biggest volume.

In 2023, Texas issuers sold $59 billion of debt, ahead of the two eternal bond giants to become the largest state by volume for the first time since 1981.

“Texas continues to be one of the states with the highest issuance volume due to rapid growth and the critical need for infrastructure across the state,” Noe Hinojosa, president of Estrada Hinojosa & Company, said in an email. “School districts in particular continue to issue debt to absorb the influx of new students as the state grows.”

Texas saw the largest population growth among states between July 2022 and July 2023, gaining 473,453 people, according to the US census Desk.

Hinojosa said Texas schools are on track to match or exceed the number of issues and the amount of debt they sold in 2023.

“We’re about 60% of the way through the year and yet we’ve seen schools delivering about 80% of last year’s volume,” he noted.

Education-related issuances in Texas through the first six months of 2024 totaled $16.29 billion, a 46% increase from mid-2023, as public school districts exploited billions of dollars in the bond authorization approved by voters in recent years.

In the May 4 statewide bond election, voters approved $7.61 billion, or 74.7%, of the $10.18 billion in general obligation bonds that schools submitted to the ballot, according to data from the Texas Bond Review Board. Meanwhile, the Houston Independent School District, the state’s largest public school system, is voting. seeking record $4.4 billion bonds in the November 5 general election.

Eligible Texas public and charter school bonds are: guaranteed by the state Permanent school fund classified AAA.

Texas generated the region’s largest deals, led by a nearly $1.1 billion San Antonio Electric and Gas Revenue Bond offering in June led by Jefferies and Wells Fargo Securities, followed by a $950 million Harris County Toll Revenue and Reimbursement Bond offering in May led by Raymond James, and a nearly $870.3 million Houston Utility Revenue and Reimbursement Bond offering in April, also led by Jefferies. In fourth place was the Midland Independent School District, which sold $860.6 million in GO bonds through Raymond James in March.

Colorado Health Facilities Authority was the region’s largest issuer with $2.03 billion in conduit debt sold, including $1.1 billion in revenue bonds for Intermountain Health in June. The University System of Texas Board of Regents came in second with $1.627 billion in bonds, and San Antonio was third with its $1.1 billion deal in June.

Jefferies, which moved from third place in 2022 to the top underwriter for Southwest deals in 2023, ranked first in the first half of 2024, credited by LSEG with $5.855 billion of debt. RBC Capital Markets ranked second with $4.648 billion of bonds, followed by Raymond James with $4.553 billion, Wells Fargo with $4.297 billion and Piper Sandler with $3.1 billion.

The eligibility of RBC and Wells Fargo, along with other top 10 Southwest underwriters BofA Securities, JP Morgan Securities and Morgan Stanley, to underwrite Texas government debt is under review by the State Attorney General Office for their involvement with Net Zero Alliancewhich aims for a transition to net-zero greenhouse gas emissions by 2050.

The state, which enacted laws in 2021 banning state and local government contracts worth $100,000 or more with banks and financial firms that “boycott” or “discriminate” against the fossil fuel or firearms industries, has so far banned Barclays, as well as UBS and Citigroup, which have exited the municipal bond market.

The mid-year underwriter ranking for Texas places Jefferies in first place, followed by Raymond James, Wells Fargo, Piper Sandler and JP Morgan.

In Oklahoma, where a similar ban applies to companies that “boycott” energy activities and there are divestment provisions for pensions, DA Davidson, BOK Financial Securities, Robert W. Baird, Goldman Sachs and Morgan Stanley are among the top five underwriters. The state’s list of boycotters includes Barclays, BofA, JP Morgan and Wells Fargo.

Estrada Hinojosa & Company

The implementation of the state’s Energy Discrimination Elimination Act of 2022 has been definitively stopped last month An Oklahoma County District Court judge ruled that the measure violated the state constitution in a case brought by a state pension recipient. An appeal by state Attorney General Gentner Drummond is pending before the Oklahoma Supreme Court.

Several studies have highlighted the negative financial and economic impacts of the Texas and Oklahoma bans due to reduced competition among underwriters. The Texas-based American Energy Institute pushed back against certain studies.

Hilltop Securities, last year’s busiest financial adviser for Southwest transactions, retained that position for the first half of 2024, credited by LSEG with $10.291 billion in debt, followed by PFM Financial Advisers with $4.680 billion, Estrada Hinojosa with nearly $2.779 billion and Specialized Public Finance with $2.726 billion.

McCall Parkhurst & Horton topped the fixed income advisor rankings with nearly $11.795 billion of debt after coming in first in 2024. Bracewell ranked second with $5.491 billion, followed by Norton Rose Fulbright with $3.7 billion and Orrick Herrington & Sutcliffe with $3.112 billion.

The same financial advisers and bond advisory firms rank in the same order for Texas transactions during the first half of the year.

The Southwest region includes Arkansas, Arizona, Colorado, Kansas, New Mexico, Oklahoma, Texas, and Utah.