Title
Consider an ordinance authorizing the issuance and sale of Combination Tax and Revenue Certificates of Obligation, Series 2025 for capital projects.
Body
DATE: April 1, 2025
TO: Kent Cagle, City Manager
FROM: Judith Tangalin, Executive Director of Finance
SUBJECT: Certificates of Obligation
BACKGROUND AND FINDINGS:
During a Special City Council Workshop on January 9, 2023, the City Council directed staff to seek citizen input on potential bond projects. Based on feedback from that workshop, staff conducted an online survey, with results presented at a follow-up Special Workshop on March 30, 2023.
At the March 30 workshop, survey results and citizen feedback were discussed. On July 11, 2023, the City Council adopted an ordinance authorizing the issuance of Combination Tax and Revenue Certificates of Obligation, Series 2023, for capital projects. However, not all projects identified in the citizen survey were addressed.
By FY 2025, addressing the remaining survey projects and other priorities became necessary. On September 17, 2024, the City Council directed staff to proceed with Certificates of Obligation for the Featherline Road Project, Fire Station 5 Replacement, Veteran’s Park Development, and Mohawk Drive Road Project. Notably, Fire Station 5 Replacement and Mohawk Drive were part of the original FY 2023 citizen survey.
After evaluating the City’s priorities and available debt capacity, city management recommends proceeding with the Chaparral Road Project due to its importance and addressing Veteran’s Park Development at a later date. Additionally, Golf Course Improvements are recommended to be included in the project list, funded through a revenue pledge.
On February 4, 2025, City Council authorized proceeding with the issuance of certificates of obligation for these capital projects and directed the publication of notice of intention to issue up to $39 million of combination tax and revenue certificates of obligation for capital projects (CCMR# 25-019R). The language for the public notice was approved as part of the resolution and was published in the Killeen Daily Herald on February 7, 2025 and February 14, 2025. The notice was also published on the City’s website.
On March 11, 2025, the City met with Standard & Poor’s for a bond rating review, and on March 20, 2025, Standard & Poor’s affirmed the City’s AA rating with a Stable outlook for the Certificates of Obligation. The Official Statement was distributed to potential bidders for the competitive sale, with bid results due on April 1, 2025. The attached draft ordinance will be updated with the final bid results upon receipt, as the bids for the Certificates of Obligation are due on the same day City Council will consider the ordinance authorizing their issuance.
This item presents an ordinance for City Council consideration on April 1, 2025, authorizing the issuance of Certificates of Obligation. The bid results will be presented during the same meeting.
The City anticipates receiving the bond proceeds on April 22, 2025. These funds will be allocated to priority projects as detailed in the table below:
|
Project |
Amount |
|
Featherline Drive |
$11,390,000 |
|
Mohawk Drive |
8,940,600 |
|
Chaparral Road |
6,000,000 |
|
Golf Course |
3,000,000 |
|
Fire Station Five Rebuild |
9,000,000 |
|
Estimated Issuance Costs |
485,000 |
|
Total Certificates of Obligation |
$38,815,600 |
THE ALTERNATIVES CONSIDERED:
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Which alternative is recommended? Why?
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CONFORMITY TO CITY POLICY:
This action has been reviewed by the City's Bond Counsel, Bart Fowler, of Mccall, Parkhurst, & Horton, and the City's Financial Advisor, Dan Wegmiller, of Specialized Public Finance, Inc. and conforms to state and local law, including:
• Local Government Code, Section 271, known as the Certificate of Obligation Act of 1971
• City Charter, Article VI. Issuance and Sale of Bonds
• The Financial Governance Policy, Section XIV. Debt
FINANCIAL IMPACT:
What is the amount of the revenue/expenditure in the current fiscal year? For future years?
The debt service for the certificates of obligation will be paid from the Debt Service Fund and the Golf Course Enterprise Fund. The annual debt service payment is estimated to be $3,034,000.
Is this a one-time or recurring revenue/expenditure?
The certificates of obligation will be repaid over a 20-year term.
Is this revenue/expenditure budgeted?
Debt service for the certificates of obligation is included in the FY 2026 proposed budget in both the Debt Service and Golf Course Funds.
If not, where will the money come from?
Bond proceeds and offsetting expenditures will be appropriated on the FY 2025 Mid-Year Budget Amendment.
Is there a sufficient amount in the budgeted line-item for this revenue/expenditure?
Yes, upon approval of the FY 2025 Mid-Year Budget Amendment and FY 2026 Proposed Budget.
RECOMMENDATION:
City Council approve the ordinance authorizing the issuance and sale of Combination Tax and Revenue Certificates of Obligation, Series 2025, for capital projects.
DEPARTMENTAL CLEARANCES:
Finance
Legal
ATTACHED SUPPORTING DOCUMENTS:
Ordinance
Presentation