PRESENTER: Presenter
Sandy Paulos, Director of Finance
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SUBJECT: Title
Discuss and consider approval of an ordinance authorizing the issuance of city of New Braunfels, Texas general obligation and refunding bonds in one or more series; levying an ad valorem tax in support of the bonds; approving a paying agent/registrar agreement, an official statement, a purchase agreement, and an escrow agreement as needed for the sale of bonds; establishing procedures for selling and delivery of one or more series of the bonds; and authorizing other matters relating to the bonds.
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DEPARTMENT: Finance
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COUNCIL DISTRICTS IMPACTED: N/A
BACKGROUND INFORMATION:
The General Obligation Bond issuance is the first of the 2023 Bond Program and totals $35,000,000. The proceeds will be utilized to support projects within Proposition A (Transportation), Proposition B (Parks & Recreation) and Proposition C (Library Facilities).
The refunding portion of the issuance will be used to refund the remaining principal on the 2014 General Obligation Bonds (GO Bonds) and the 2014A Certificates of Obligation (CO’s) which are now eligible to be refunded. The amount eligible for refunding is $8,920,000 for the 2014 GO Bonds and $4,320,000 for the Series 2014A CO’s. The refunding of these bonds will generate gross annual savings of approximately $50,000. The savings will be incorporated into the issuance schedule of the 2023 Bond Program issuances. A parameter sale is recommended for this issuance due to the interest rate environment
Parameter Sale
The City Council has previously approved parameter sales for the City. As a recap, the parameter sale method would set minimum parameters of the general obligation and refunding bonds and designate the City Manager and Director of Finance as the pricing officers.
The attached ordinance establishes the proposed parameters for the 2014 refundings as follows:
1. Maximum Par to be issued: $48,240,000
2. Maximum Interest Rate: As defined by statute
3. Maximum Maturity: February 1, 2043
4. Minimum Gross Savings: 3% or approximately $500,000
If any of the parameters are not met, the designated officials would not have the ability to complete the pricing/refunding.
Refunding: Given the current rate environment, the refunding parameter may not be be able to be met. Given the rate risk, the parameter sale gives the organization the ability to price as soon as Wednesday, September 6. In the event that the refunding is not feasible, the new money component for the 2023 bonds ($35 million) will still be issued. In addition, the parameter ordinance provides up to six months to execute the refunding at a later date if and when it becomes cost effective and within the parameter described earlier (3% or $500,000 in savings).
ISSUE:
N/A
FISCAL IMPACT:
The proceeds for the GO and Refunding Bonds will be used to support the 2023 Bond Program and to refund the 2014 GO Bonds and 2014A CO’s. As stated above, the refunding is projected to generate annual savings of approximately $50,000. The annual debt service payment has been structured to align with the I&S rate for FY 2024.
Recommendation
RECOMMENDATION:
Staff recommends approval of the ordinance.