The City of Brownwood will soon begin issuance and sale of the City of Brownwood Combination Tax and Revenue Certificates of Obligation, Series 2012 in order to raise $10,750,000 which will be used to fund capital improvement projects after a unanimous vote approving such during Tuesday’s city council meeting.
The issuance and sales of these bonds have been before the council for discussion for about a year, according to City Financial Officer Walter Middleton, and the funds raised from these bonds will be used for three main projects.
“The bond proceeds will be used to perform street improvements, to build a new fire station and to make improvements out at our soccer facilities,” said Middleton. “Each of those projects will be considered individually for approval so you still have a significant level of input on how these proceeds will be spent, but that is the description for the public on how these funds will be spent. We have a few minor items that can also be done with the money but those are the three main projects.”
George Williford of First Southwest Financial (pictured top left), advisor to the City of Brownwood, also spoke to the council regarding the details and cost of the bonds.
The Certificates of Obligation were priced on Monday, May 21st before the city council meeting.
Middleton stated that it is the city’s intention to purchase bond insurance which will cost approximately $141,000 and will be covered as a part of the issuance costs upon the sale of the bonds. He stated that the present value savings in the city’s interest cost by purchasing bond insurance will be at least $254,000 with an economic benefit of $344,000, which will be recouped over the life of the bonds.
“These savings certainly justify the cost of the insurance, so our recommendation will be to include that cost in the net issuance costs at the time the bonds are sold,” said Middleton. “This will reduce the net bond proceeds but will save us much more over the long-term.”
Williford stated that the true calculated effective rate over the 20 year term of the debt will be 3.788%. He explained that we are near an all time low for tax exempt debt service rates.
“This is very fortunate, good timing for selling debt,” said Williford who explained this fortunate timing allows for maximizing project dollars.
Middleton explained the process stating that documents will be sent to the Attorney General’s Office for approval which takes about three weeks, after which the city may close on the bonds and sell them. Williford stated that a designated closing date had been set for mid June.
“June 19th is the designated closing date,” said Williford. “So what that means is that on June 19th, literally you will have $10,642,000 in your hands on deposit and ready to be spent on projects.”
The ordinance authorizing this issuance and sales of the certificates of obligation was a single reading ordinance and was unanimously approved by the council.
