Title
Consider an ordinance designating the City Manager as the pricing officer and authorizing the issuance and sale of the City of Killeen, Texas General Obligation Bonds in one or more series.
Body
DATE: April 7, 2026
TO: Kent Cagle, City Manager
FROM: Judith Tangalin, Executive Director of Finance
SUBJECT: Bond Refunding Opportunity
BACKGROUND AND FINDINGS:
Staff works with City’s Financial Advisor, Dan Wegmiller of Specialized Public Finance, Inc. to identify bond refunding opportunities that will generate interest savings on outstanding debt. Market conditions are such that $28,465,000 in outstanding bonds can be refunded, saving the City an estimated $1,029,871, net present value, over the life of the bonds. The estimated savings are contingent on market conditions remaining favorable and will come from the issuing new bonds, with more favorable terms to pay off existing bonds, creating a cost savings. There will be no change to the term of the bonds.
Texas law provides two options for the issuance of refunding bonds. The City may either:
1) Adopt an ordinance with all the final pricing terms of the refunding bonds in the ordinance; or
2)Adopt an ordinance that delegates the ability to set the final pricing terms of the refunding bonds to any officer or employee of the City. The final pricing terms must fall within certain parameters set out in the approved delegation ordinance.
The City has utilized both options in the past. Option 1 is not recommended due to the short timeframe involved (City Council must approve within 1-2) days after bond pricing), and the lack of flexibility in entering the market in optimum conditions.
Option 2 provides the flexibility to choose the bond pricing date when market conditions are favorable. Staff and the City’s Financial Advisor recommend option 2 to access the market when ready and not just around City Council dates.
The pricing Officer will set the final terms of the refunding bonds, as long as the terms fall within the parameters established by City Council in the delegation ordinance. With the approval of the delegation ordinance, City Council establishes the following parameters for the refunding bonds:
1) Maximum principal amount - up to $29,250,000
2) Maximum maturity date - 08/01/2034
3) Minimum percentage of net present values savings that must be achieved - 2%
4) Maximum interest rate - 3.75%
5) The outstanding bonds that will be included - all outstanding bonds fall within the above parameters may be included. The estimated refunding of $28,465,000 includes the series 2015 and 2016 G.O. Bonds.
The maximum principal amount is being set at $29,250,000 instead of the $28,465,000 to allow room for bonds that currently fall outside the parameters outlined above. If the market conditions improve such that the additional bonds fall within the above parameters, the City will be able to refund up to $29,250,000 for even more savings of at least 2% net present value.
The Pricing Officer is prohibited from setting final terms outside the parameters established by City Council in the delegation ordinance. The delegation ordinance also sets the amount of time that the Pricing Officer has, to price the refunding bonds before the delegation of authority expires. The Pricing Officer’s authority to execute a Pricing Certificate expires at 5:00 p.m. Central Standard Time on April 7, 2027. Bonds priced on or before the expiration date may be delivered to the purchasers after such date.
The pricing Officer will sign a certificate prepared by Bond Counsel that contains the final terms of the refunding bonds, which must be within the parameters established by City Council by the delegation ordinance. The Pricing Certificate and the delegation ordinance together are the City’s official authorization of the refunding bonds. There is no further action required by City Council. Staff will report back to City Council the results of the bond refunding or provide updates on the status.
THE ALTERNATIVES CONSIDERED:
N/A
Which alternative is recommended? Why?
N/A
CONFORMITY TO CITY POLICY:
Texas Government Code, Chapter 1207 - Refunding Bonds, authorizes municipalities to refund bonds. City Charter, Article VI-Issuance and Sale of Bonds, authorizes the City to issue bonds.
Financial Governance Policy, XV. Debt (J) Debt Refunding, authorizes the refunding of dept with a net present value savings of 2%.
FINANCIAL IMPACT:
What is the amount of the revenue/expenditure in the current fiscal year? For future years?
The current estimate includes over $28.4 million in bond proceeds being received from the issuance of the refunding bonds. The bond proceeds will cover the issuance costs, and the remaining proceeds will be transferred to an escrow account to retire the old bonds when callable. The delegation ordinance is for $29,250,000 which includes additional bonds that are outside the parameters established in the delegation ordinance. If market conditions improve such that the additional bonds fall within parameters, the city would be able to refund additional bonds for increased savings.
Is this a one-time or recurring revenue/expenditure?
This is a one-time expenditure.
Is this revenue/expenditure budgeted?
A budget amendment is required.
If not, where will the money come from?
Funding, to retire the old bonds will be generated from the sale of the refunding bonds. A subsequent budget amendment will recognize the revenue from the issuance of the refunding bonds, which will be used to cover the issuance costs, and the remaining proceeds will be placed in escrow to pay the old bonds as they become callable.
Is there a sufficient amount in the budgeted line-item for this revenue/expenditure?
Upon approval of a subsequent budget amendment.
RECOMMENDATION:
Staff recommends approval of an ordinance designating the City Manager as the pricing officer and authorizing the issuance and sale of the City of Killeen, Texas General Obligation Bonds, in one or more series.
DEPARTMENTAL CLEARANCES:
Finance
Legal
ATTACHED SUPPORTING DOCUMENTS:
Ordinance