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GARLAND
POLICY REPORT
Work Session Item 3.d.
City Council Work Session Agenda
Meeting Date:
03/06/2023
Item Title:
Tax-Exempt General Obligation Refunding Bonds and General Obligation Taxable Bond
Submitted By:
Matt Watson
Strategic Focus Areas
:
Sound Governance and Finances
ISSUE
Consider refunding approximately $50 million of General Obligation Commercial Paper Notes, Series 2021 and the issuance of approximately $10 million in Taxable General Obligation Bonds. The purpose of this transaction is to refund a portion of variable rate commercial paper notes used to fund projects included in the voter approved bond programs and fund Economic Development initiatives approved by the voters in the 2019 Bond Program.
OPTIONS
Authorize staff to refund approximately $50 million of General Obligation Commercial Paper Notes, Series 2021 with General Obligation Refunding Bonds, series 2023 and issue approximately $10 million of General Obligation Bonds, taxable series 2023.
Do not approve the issuance and refunding of General Obligation Bonds.
RECOMMENDATION
Unless otherwise directed by Council, this item will be scheduled for formal consideration at the May 2, 2023 Regular Meeting.
BACKGROUND
Commercial Paper is a short-term debt instrument that is issued incrementally as funds are needed to finance the General Obligation Capital Improvement Program and has maturities ranging from 1 to 270 days. Interest is paid at each maturity date but principal is rolled to a new maturity date by issuing replacement commercial paper. This process continues until long-term debt is issued at a fixed rate to refinance the outstanding commercial paper. Due to current market conditions, staff and the City's Financial Advisor, Hilltop Securities, are recommending to refund approximately $50 million of outstanding Commercial Paper into fixed rate long-term General Obligation debt. In addition, as part of the Economic Development proposition approved by voters in the 2019 Bond Program staff is seeking authorization to move forward with issuing approximately $10 million of Taxable General Obligation Bonds to fund Council approved Economic Development initiatives.
CONSIDERATION
The Bonds will be fixed rate debt with a 20-year amortization period. The Bonds will have projected annual debt service payments of approximately $4.2 million a year between 2024 and 2043. The projected interest rate for the tax-exempt Refunding Bonds is 3.52% with the taxable portion estimated to be at approximately 4.79%. The exact amount of annual debt service and the interest rate is subject to market conditions between now and the final pricing date of May 2, 2023.
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