City of Duncanville
Navigating selective market conditions to achieve strong financing execution
Background
The City of Duncanville, Texas, located in Dallas County within the Dallas-Fort Worth metroplex, issued $11,050,000 of Tax and Waterworks and Sewer System (Limited Pledge) Revenue Certificates of Obligation, Series 2026, to fund water infrastructure improvements, including the acquisition and installation of advanced water meters throughout the City.
The financing carried underlying ratings of “AA” from both S&P and Fitch and featured a 16-year amortization structure with maturities extending through 2042. Baird served as sole managing underwriter for the transaction.
Opportunity & Implementation
The City brought the financing to market to fund long-term utility infrastructure improvements and support continued investment in Duncanville’s waterworks and sewer system.
The transaction was priced during a competitive municipal issuance environment where investor demand remained selective across certain maturities despite continued interest in high-quality Texas credits. As a result, the order period developed more gradually than anticipated, particularly in select intermediate and long maturities.
At the close of the order period, approximately $8 million remained unsold across the 2027-2034 and 2037-2042 maturities. Baird worked closely with institutional investors to place the remaining balances while keeping pricing competitive with comparable Texas issuers.
Following the order period, approximately $3 million of the unsold balances were subsequently sold at the original pricing levels, reflecting continued investor interest in the credit despite broader market selectivity. For certain longer-dated maturities, Baird adjusted pricing by approximately three basis points to facilitate broader distribution and place the remaining balances.
Solution
Baird’s underwriting strategy combined active balance sheet management with targeted pricing adjustments to support overall transaction performance. Working closely with its institutional distribution network throughout the trading day, Baird successfully placed nearly the entire transaction.
The financing provided the City with long-term capital to modernize utility infrastructure and fund critical system improvements. The Certificates were secured by a combination of the City’s ad valorem tax pledge and a limited pledge of net revenues from the City’s waterworks and sewer system.
Results & Impact
Despite slower initial order flow, Baird achieved a successful execution that compared favorably against larger benchmark Texas utility transactions brought to market during the same period. Ultimately, the financing priced only one basis point wider in the 2035-2037 portion of the curve than a significantly larger comparable AA-rated Texas utility transaction.
The underwriting team reduced residual balances throughout the trading day and concluded the transaction with minimal inventory exposure, retaining only $325,000 of the 2027 maturity for offering.
