Title
Consider a memorandum/resolution authorizing the issuance of certificates of obligation for capital projects and further directing the publication of notice of intention to issue certificates of obligation for capital projects.
Body
DATE: February 4, 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.
The attached resolution represents the initial step in the process of issuing bonds to fund capital projects. This resolution authorizes the issuance of Certificates of Obligation, outlines the allowable uses of bond proceeds, establishes a maximum principal amount of $39 million, and directs the publication of a public notice of intent.
The public notice, included with the resolution, is scheduled for publication on Sunday, February 9, 2025, and Sunday, February 16, 2025. It will also be posted on the City’s website for a period exceeding 45 days.
Key Steps in the Process:
1. Publish the notice as directed by the resolution.
2. Obtain a credit rating for the Certificates of Obligation.
3. Prepare and distribute the Official Statement to bidders for the competitive sale.
4. Present an ordinance authorizing the issuance of Certificates of Obligation to City Council for consideration on April 1, 2025. Bids for the Certificates of Obligation will also be due on April 1, 2025, and 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:
1. Decline to approve the issuance of Certificates of Obligation for capital projects, including the publication of the notice of intention to issue the certificates.
2. Approve the issuance of Certificates of Obligation for capital projects and authorize the publication of the notice of intention, but for a different amount.
3. Approve the issuance of Certificates of Obligation for capital projects and authorize the publication of the notice of intention as presented.
Which alternative is recommended? Why?
Option 3 is recommended because it supports the projects prioritized by City Council while adhering to the City’s available debt capacity.
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?
There will be a nominal fee to publish the two notices of intent and an examination fee payable to the Attorney General of Texas Public Finance Division in the amount of $9,500.
Is this a one-time or recurring revenue/expenditure?
One-time
Is this revenue/expenditure budgeted?
No
If not, where will the money come from?
Revenue and expenditure 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
RECOMMENDATION:
City Council approve proceeding with issuance of certificates of obligation for capital projects and further directing the publication of notice of intention to issue certificates of obligation for
capital projects.
DEPARTMENTAL CLEARANCES:
Finance
Legal
ATTACHED SUPPORTING DOCUMENTS:
Resolution
Presentation