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GARLAND
CITY COUNCIL STAFF REPORT
Work Session Item 2.
City Council Work Session
Meeting Date:
04/01/2024
Title:
Issuance of General Obligation Refunding and Improvement Bonds
Submitted By:
Matt Watson
Strategic Focus Area
:
Sound Governance and Finances
Future-Focused City Organization
Issue/Summary
Consider an ordinance to issue up to $112.5 million in General Obligation Refunding and Improvement bonds, Series 2024. In addition, the ordinance will authorize the appointment of a pricing officer and delegate to the pricing officer the authority to approve on behalf of the City terms of sale of these bonds, establishing parameters for the approval of such matters by the pricing officer, and authorizing the termination of the General Obligation Commercial Paper Program, Series 2021. The purpose of this transaction is to provide funding for 2004 and 2019 Bond Program projects identified in the Council approved 2024 CIP and establish a new funding strategy to save debt service issuance cost.
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 $51 million of outstanding Commercial Paper into fixed rate long-term General Obligation debt. In addition, this Commercial Paper Program is set to expire on May 24, 2024 and staff (along with Hilltop Securities) is recommending the termination of this program due to changing market conditions and regulations placed on the Commercial Paper liquidity program which has made it costly to administer. If the Council concurs, the Financial Services Department will begin issuing tranches of long-term GO bonds periodically based on project schedules and cash flow needs for projects included in the 2004 and 2019 Bond Program that have been appropriated in the 2024 CIP. Based on current cash flow projections, staff is recommending the issuance of approximately $51 million of tax-exempt General Obligation Improvement Bonds and an additional $10.5 million of taxable General Obligation Improvement Bonds to fund a portion of the bond program projects approved in the 2024 Capital Improvement Program.
Consideration / Recommendation
The Refunding and Improvement Bonds will be fixed rate debt with a 20-year amortization period. The bonds' projected annual debt service payments will not require a tax rate increase and are in alignment with the City's long-term debt model. The exact amount of annual debt service and the interest rate is subject to market conditions between now and the final pricing date.
Attachments
Ordinance
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