Title
Consider an ordinance authorizing the issuance of City of Killeen, Texas, Limited Tax Note, Series 2022 for Fire Department equipment.
Summary
DATE: November 8, 2022
TO: Kent Cagle, City Manager
FROM: Judith Tangalin, Interim Executive Director of Finance
SUBJECT: Fire Vehicle and Equipment Tax Note
BACKGROUND AND FINDINGS:
This ordinance is for the issuance of a limited tax note to purchase four (4) fire replacement vehicles and associated equipment and one (1) new additional ambulance for Fire Station #4. The Fire Department has fifteen (15) large vehicles and four (4) of these vehicles are past their scheduled replacement date. The tax note will purchase the four (4) replacement vehicles that are behind schedule in addition to the ambulance required for the new Fire Station #4.
The five (5) vehicles and associated * costs are:
|
Year |
Vehicle Description |
New Vehicle Cost |
Quantity |
Total Cost |
|
1996 |
Pumper Truck |
$924,320 |
1 |
$924,320 |
|
2001 |
Pumper Truck |
$802,902 |
2 |
$1,607,804** |
|
2008 |
Aerial Ladder Truck |
$1,888,122 |
1 |
$1,888,122 |
|
|
FS#4 Ambulance |
$446,145 |
1 |
$510,200*** |
|
Total Cost |
$4,930,446 |
*The 5 new vehicles will come fully equipped with necessary tools and equipment.
**Includes $2,000 HGAC cooperative fee for all Siddons-Martin purchases.
***Includes $600 HGAC cooperative fee for the Sterling McCall purchase.
The Texas Government Code, Chapter 1431, and the City’s Financial Governance Policy authorize the issuance of tax notes.
The tax note will be repaid over a seven-year term with an estimated annual debt service payment of $820,000. The fund balance in the Debt Service Fund is currently estimated to be $4,721,823 at fiscal yearend 2022 and must be used towards the retirement of debt. Fund balance accrues when more revenue is received than budgeted and/or when expenditures are less than budget. The tax note will be repaid with a combination of accumulated fund balance and expiring debt in the Debt Service Fund. There is no change in the tax rate from issuing tax notes.
The City’s Financial Advisor, Dan Wegmiller of Specialized Public Finance, Inc., prepared and distributed a Term Sheet describing the amount and use of the funds to banks. Banks will submit bids for the tax note to an independent Placement Agent, FHN Financial on November 15, 2022. The results of the bid will be provided to City Council at the regularly scheduled City Council meeting that day.
THE ALTERNATIVES CONSIDERED:
1 - Do not issue the limited tax note and find another funding source to replace the Fire Department vehicles; or
2 - Issue the limited tax note that provides funding for the Fire Department vehicles.
Which alternative is recommended? Why?
Alternative 2 is recommended. There are no other viable funding sources for the vehicles, which are already past their recommended replacement schedule. The annual debt service for the tax note will be repaid with a combination of accumulated fund balance and expiring debt in the Debt Service Fund.
CONFORMITY TO CITY POLICY:
Texas Government Code, Chapter 1431 - authorizes the issuance of tax notes.
City Charter, Article VI and Article VII, Section 80 - authorizes the issuance of tax notes.
Financial Governance Policy, XIV. Debt (B-D) - authorizes the issuance of tax notes.
FINANCIAL IMPACT:
What is the amount of the expenditure in the current fiscal year? For future years?
The total estimated cost inclusive of issuance costs is $5,731,731. The annual debt service payments including interest are estimated to be:
FY 2023 - $821,355
FY 2024 - $817,188
FY 2025 - $817,625
FY 2026 - $817,125
FY 2027 - $820,688
FY 2028 - $818,125
FY 2029 - $819,625
Is this a one-time or recurring expenditure?
The debt service payments are recurring from FY 2023 through FY 2029.
Is this expenditure budgeted?
Yes, funds are included in the Debt Service Fund in accounts 400-9000-489.71-10 and 400-9000-489.72.10.
If not, where will the money come from?
N/A
Is there a sufficient amount in the budgeted line-item for this expenditure?
Yes
RECOMMENDATION:
City Council approve the ordinance authorizing the issuance of Limited Tax Note, Series 2022.
DEPARTMENTAL CLEARANCES:
Finance
Fire
Legal
ATTACHED SUPPORTING DOCUMENTS:
Ordinance