To: Mark R. Hafner, City Manager
From: Aaron Rector, Director of Finance
Subject:
Title
Consider an ordinance authorizing redemption of a portion of City Of Keller, Texas General Obligation Refunding Bonds, Series 2010.
Action
Requested:
Consider an ordinance authorizing redemption of a portion of City Of Keller, Texas General Obligation Refunding Bonds, Series 2010
Background:
The 2010 General Obligation (GO) Refunding bonds have reached a call date meaning the city has the opporutinity to pay off future principle now and reduce future interest payments. The 2010 GO Refunding bonds are related to bonds issued in 2001 and 2002 for construction projects related to the Tax Increment Reinvestment Zone (TIRZ). The proposed redemption ordinance would authorize the use of $5,000,000 from the TIRZ fund fund balance to be used to reduce future debt obligation costs. A minimum notice of 30 days is required prior to redemption, so if approved, the earliest available redemption date would be August 22, 2017. Because the call date is after the next debt payment schedule, an amount of $3,922 for interest will be required with the redemption. Even with the interest payment, the total projected savings will be $1,606,437.
Currently, the outstanding debt obligation at October 1, 2017 is $10,029,994 and is scheduled to end in fiscal year (FY) 2027-28. After the redemption, the outstanding debt obligation will be $3,419,675 and will end in FY 2020-21. While the debt exceeds the term of the TIRZ, any fund balance from the TIRZ fund will go to the Debt Service fund to fund the remaining debt obligations. In addition, staff will continue to work with the city’s financial advisors to look for opportunities to minimize the impact of the TIRZ debt on the Debt Service fund prior to the end of FY 2017-18.
If the redemption is approved, the projected year-end fund balance would be $426,784 or 14.4% of annual debt service payments. Even after the redemption, the city would be in compliance with the Fund Balance policy by 4.4%.
Budget Impact:
The proposed redemption would use $5,000,000 of TIRZ fund’s fund balance and would leave a projected year-end fund balance of $426,784. The expenditure was not included in the budget, so a budget amendment will be required at a later date.
Financial
Considerations:
The redemption be used reduce future years overall outstanding debt requirements which will be $10,029,994. The proposed redemption of $5,000,000 and interest payment of $3,922 would reduce the overall outstanding TIRZ debt from $10,029,994 to $3,419,675. This results in a savings to the city of approximately $1,606,347.
Citizen Input/
Board Review:
N/A
Legal Review:
Bond counsel has prepared the ordinance.
Alternatives:
City Council has the following alternatives:
- Approve as submitted
- Approve with changes
- Denial
Council Action:
Consider an ordinance authorizing redemption of a portion of City Of Keller, Texas General Obligation Refunding Bonds, Series 2010