PRESENTER: Presenter
Sandy Paulos, Director of Finance
Body
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.
Header
DEPARTMENT: Finance
Body
COUNCIL DISTRICTS IMPACTED: N/A
BACKGROUND INFORMATION:
The General Obligation Bond issuance is the second of the 2023 Bond Program and totals $40,000,000. 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), 2015 Certificates of Obligation (CO’s), 2015 GO and Refunding Bonds, and 2016 GO and Refunding Bonds, which are all now eligible to be refunded. The amounts eligible for refunding are below:
The refunding of these bonds will generate gross annual savings of approximately $75,000 from FY 2027 through FY 2034. . The savings will be for the benefit of the City’s Interest and Sinking (Debt Service) Fund.
Parameter Sale
A parameter sale is recommended for this bond issuance due to interest rate volatility. The City Council has previously approved parameter sales for the City. The parameter sale method sets minimum parameters of the general obligation and refunding bonds and designates the City Manager and Director of Finance as the pricing officers.
The attached ordinance establishes the proposed parameters for the GO Bonds and the 2014, 2015, and 2016 Refundings as follows:
1. Maximum Par to be issued: $62,650,000
2. Maximum Interest Rate: As defined by statute
3. Maximum Maturity: February 1, 2045
4. Minimum Gross Savings: 3%
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 able to be met. Given the rate risk, the parameter sale gives the City the ability to price as soon as Friday, August 13. In the event that the refunding is not feasible, the new money component for the 2023 bond authorization ($40 million) will still be issued. In addition, the parameter ordinance provides up to twelve months to execute the refunding at a later date, if and when it becomes cost effective and within the parameter described earlier (3% minimum 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, 2015 CO’s, 2015 GO and Refunding Bonds, and the 2016 GO and Refunding Bonds. As stated above, the refunding is projected to generate annual savings of approximately 3% at a minimum. The annual debt service payment will be included in the FY 2026 I&S rate calculation.
Recommendation
RECOMMENDATION:
Staff recommends approval of the ordinance.