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GARLAND
POLICY REPORT
Work Session Item 3.c.
City Council Work Session Agenda
Meeting Date:
03/06/2023
Item Title:
Notice of Intent to Issue Certificates of Obligation
Submitted By:
Matt Watson
Strategic Focus Areas
:
Sound Governance and Finances
ISSUE
On February 7, 2023, Council adopted the 2023 Capital Improvement Program (CIP), which contemplates a Certificate of Obligation (CO) bond sale to fund a portion of the CIP. Council is asked to consider approving a notice of intent resolution at the March 7, 2023 Regular Meeting to provide legal authorization for the certificates. It should be noted that approval of a notice of intent resolution will not obligate the City to issue debt and formal approval of the Certificates of Obligation is expected to occur at the May 2nd, 2023 Regular Council Meeting.
OPTIONS
Consider approval of a notice of intent resolution on March 7, 2023 to meet the legal requirements for issuing certificates of obligation to fund a portion of the 2023 CIP and pay related issuance costs.
Do not approve a funding source for a portion of the 2023 CIP.
RECOMMENDATION
This item is scheduled for formal consideration at the March 7, 2023 Regular Meeting.
BACKGROUND
The City Manager formally submitted the proposed CIP to Council at the Regular Meeting on January 17, 2023 and staff made copies of the proposed CIP available for public inspection and review the next day in libraries and the City Secretary's Office. The City Council held a Special Budget Work Session on January 21, 2023, to review the proposed program. In addition, Public Hearings on the Proposed CIP were held on January 24, 2023 and February 7, 2023. The 2023 Capital Improvement Program was adopted by Council on February 7, 2023 and requires the issuance of Certificates of Obligation. In compliance with City Council's Financial Policy, Certificates of Obligation debt is issued, so the debt maturities are aligned with the useful lives of the capital improvements being funded. CO principal maturities range from 5 years to 20 years. CO's require approval by Council and publication of a notice of intention for issuance. The maximum amount of issuance in the Notice of Intent resolution is set at $46.5 million to fund City Council approved CIP projects.
CONSIDERATION
Since neither cash nor voter authorized bonds are available to fund a portion of the 2023 CIP, staff requests the issuance of Certificates of Obligation. Based on information from the City's Financial Advisors, Hilltop Securities Inc., the proposed certificates of obligation can be sold at an estimated interest rate of 3.65% in the current interest rate environment. At this interest rate and assuming a maximum issuance of approximately $46 million in CO debt, the City will incur additional debt service (principal and interest payments) for the certificate of approximately $4.7 million per year for fiscal years 2024 to 2028, approximately $3.2 million per year for fiscal years 2029 to 2033, and approximately $2.1 for fiscal years 2034 to 2043. The actual interest rate, annual debt service and issue costs will be finalized at the time of the bond sale (May 2, 2023). The Interest and Sinking debt service tax rate is not impacted as a result Notice of Intent to Issue Certificates of Obligation of this debt issuance.
Attachments
Resolution
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