Buffalo Bills fans buy stadium bonds in tax-averse New York – BNN Bloomberg

(Bloomberg) — Fans of the Buffalo Bills, fresh off a blowout win over the Jacksonville Jaguars, just scored another victory, this time in the municipal bond market.

About 100 private buyers this week placed orders for debt sold that will help finance construction of a new $1.7 billion stadium for the National Football League team in Orchard Park, New York. Fans in the highest tax bracket would have to find a taxable security yielding about 7% to compete with the offering’s 20-year bond payout. Treasuries would have to offer a yield of 5.83%.

That’s because the debt is exempt from state and federal income taxes, a valuable refuge in a state with one of the highest levies in the U.S.

“For New York’s highest taxpayers, this was a tough sell,” said James Pruskowski, Chief Investment Officer at 16Rock Asset Management. “This AA-rated loan offered a rare opportunity to lock in high yields without taking on the significant credit or liquidity risks typically required in other markets to achieve similar returns.”

The bonds were marketed to members of the Bills’ enthusiastic fan base, dubbed “Bills Mafia” and known in the NFL for their rowdy pregame tailgates and loud cheers that are said to resemble jet engines. The retail order period began on Monday, giving small buyers first dibs on the debt before institutional pricing was set on Tuesday.

Such priority is common in high-tax states like New York or California. In all, about 100 people placed bids on bonds, accounting for about $2.7 million in orders for the $110 million sale, a spokesman for the Erie County Comptroller said.

This year, money managers have touted the attractive yields of tax-free muni bonds after considering the value of that tax break. Investors in the highest tax brackets benefit the most from the exemption. For New Yorkers, the tax break is especially valuable, since the top tax rate is 10.9% — one of the highest in the country.

Erie County sold debt maturing in 20 years that was priced to yield 3.45%. That sounds small, but given the tax deduction on the debt, the wealthiest New Yorkers who bought the securities earned a return equivalent to 7.1% on taxable debt, according to an online tool from Eaton Vance, part of Morgan Stanley Investment Management.

For those with a household income of $400,000, the advantage remains. A comparable U.S. Treasury bond would have to yield 5.37% to compete with the 20-year Bills bond. Currently, such debt trades at a rate of about 4.18%.

The Bills bonds are rated AA by S&P Global Ratings, the third-highest rating available. Although the debt is priced at the short end of the curve, with a yield below the highest-rated benchmark bonds, suggesting strong demand for debt maturing in just a few years.

“The big demand was a result of a new name coming into the market,” said Max Christiana, a portfolio manager for Belle Haven Investments. He also noted that a sale by the New York City water utility didn’t have many short maturities, which increased demand for issues with that structure.