Brownwood City Council voted unanimously to refinance bonds and issue a new series of bonds to help make improvements to the city’s waste water treatment plant. The vote passed an ordinance authorizing the issuance of a General Obligation Refunding Bond, series 2015 in the amount of $2,250,000 to refund the remaining balances on two Certificates of Obligation issued in 2002 and 2005.
In 2002, the city issued certificates of obligation (CO) for $2 million to pay costs related to community facilities. In 2005, the city issued certificates of obligation for $1,995,000 for street improvements and sewer work in newly annexed areas in south Brownwood. The current remaining balances on these two COs are $890,000 and $1,300,000.
Together, these COs total $2,190,000 and have a blended interest rate of 4.61%. The city’s financial advisor George Williford of First Southwest felt that the city had an opportunity to refinance these bonds at a lower interest rate. The key factor for this decision was that the refinance needed to net a large enough savings to cover the cost of issuance for a new bond and return a significant savings to the city. Costs of issuance are estimated at $60,000 so the city needs to issue new bonds totaling $2,250,000 to roll these costs into the proceeds to make it cash neutral to the city, according to Williford.
The new refunding bond will be sold on a private placement basis. There were 21 requests for bids which included all local banks. Three bids were received with the lowest bid received from Citizen’s National Bank of Brownwood. The blended interest rate is 1.743%, which will result in total savings of $252,717 not of cost issuance. The present value of these savings, according to Williford is $228,594. This is a significant savings and will save approximately $32,000 per year to the city’s budget in years 2-5 and approximately $16,000 in years 6-10.The city council also voted unanimously to pass an ordinance which authorizes the issuance of a Combination Tax and Revenue Ceritificate of Obligation, series 2015 in the amount of $4,815,000 to pay costs of improving the city’s water and wastewater systems.
On August 25, 2015, the city council authorized the publication of a notice of intention to issue a CO for improvements to the water and wastewater systems. The notice was published locally on August 27 and September 3, receiving no comments from the public, according to City Finance Director Walter Middleton.
The total amount borrowed will provide funds for the following projects:
Waste Water Treatment Plant (WWTP) $3,844,000
Roanoke Tank Improvements $680,0000
Lift Station Repairs $132,000
The subtotal of these improvements are not to exceed $4,656,000 and have an issuance cost not to exceed $84,000 and a contingency fund of $75,000 for a total debt of $4,815,000.
First Southwest has refinanced the estimated issuance cost to be less than $55,000, a savings of $29,000 which will be folded into the contingency fund for now, according to Middleton who explained any remaining funds can be paid back to the bonds or used in some other manner at the WWTP if approved by the council.
These bonds were advertised to be sold on a private placement basis and 21 requests for bids, including local banks were included. One bid was received from TexasBank in Brownwood. The interest rate quoted is 2.95% for the first ten years of this 20 year bond with subsequent five year increments based on a marked-up percentage of the US Treasury rate. The floor will be 3.5% and the ceiling will be 4.5%, explained Middleton.
“The bid is a significant improvement over the amount originally projected,” said Middleton. “The original estimate was for a 4.4% interest rate. This lower rate will allow us to have annual debt service of around $335,000 instead of $373,000 originally projected. This will save us $685,000 in interest cost over the life of the bond, even assuming the maximum rate over the last ten years.”
Mayor Haynes thanked Williford and First Southwest for their help saving the citizens of Brownwood the $1/4 million. He also thanked local banks Citizens National Bank and TexasBank for providing the bond programs which would save tax payer dollars.
In other matters on Tuesday’s agenda:
*Council voted to fund the cost of an annual financial audit for the Brownwood Firemen’s Relief and Retirement Fund. This annual audit is an unfunded mandate. The city will fund this for one year, at a cost estimated at $13,000-15,000 and in the future an RFP will be requested to fund the audit cost. Brownwood Mayor Stephen Haynes stated that this audit historically has not been enforced; however, now it is being enforced. He stated that this was a “waste of money” with the small size of the Fireman’s Relief and Retirement Fund locally, but that the city must keep in compliance of the regulatory board.
*Council unanimously passed an ordinance on second and third/final reading changing the zoning classification on the property located at 701 Gifford Street, being Lot 2, part of Lot 3, and part of Sparks Lot, Block 2, of the Sunset Addition, from C-1 Local Business District to MH Manufactured Home/Mobile Home District.
*Council voted to pass an ordinance on second and third/final reading closing the alley in Block 3 of the Porter Addition from Maple Street to Hackberry Street.
*Council unanimously approved an ordinance extending the city’s obligations under the Public Improvement Development Agreement by and between Hutchins Construction Company and the City of Brownwood from September 30, 2015 to September 30, 2016.
*Brownwood Police Chief Mike Corley reported to the council that the local National Night Out held Tuesday, October 6th was a huge success. He thanked the Chamber of Commerce for their help in promoting and organizing the event. The event, he explained had the largest number of parties to date and more new parties since the first year of the event locally. Winners of prizes have not been announced and will be determined to announce on Friday at the Brownwood Area Chamber of Commerce’s monthly luncheon, according to Corley.
“It was a very successful event, best one we have ever had,” said Corley who stated he expects to once again win national recognition for the local event again this year.
