City Council - Special Meeting

We do have a quorum present. And our first and final reading on number two, item number two, is consider all matters instant and related to the issuance and sale of the City of Commerce taxes general obligation, refunding bonds, taxable series 2026, including the adoption of an ordinance authorizing the issuance of such bonds and approving all of the matters Related here to Jamie Campbell, assistant city manager.

Good evening, mayor and council. I'm going to go ahead and turn the floor over to Jorge with Hilltop, our financial advisors. They're the ones that helped facilitate the sale of the bonds this morning.

Thank you. Mayor, council, good afternoon. Good to see you all again. I know this is your one agenda item, so I'll be thorough. But if you've got any questions, please stop me and I'll walk you through those details. This is the last step, council, on really your final phase of your CIP that you've been funding. for a number of years. And you may recall that we started this conversation in April. We were back here a couple months ago talking to you about a potential update to the plan of finance, which was to help restructure your outstanding payments to make this work. within your tax rate, why tax values were a little bit flat at the time. And that kind of had an impact in the way that you budget for your debt payments. So we presented to you a scenario that allowed you to, it's what we call a window refunding or a window refinancing to fit some of the new payments and allow you to make that work within your budget. And I think it worked out really nicely. What you have in front of you today is a better result in terms of the budgetary impact than what we projected back in April. So it's nice. Number one, you got a good transaction and a good demand for your bonds today. And it allowed us to lower the interest rate. But number two, your tax base values came a little bit stronger than projected. The Hunt appraisal district kind of showed a decline in their preliminary values, but when they certified your values, it was actually a bit of an increase. That helps. So I'll go through the details and please stop me at any time. As you know, you're funding $8.5 million projects. Water and sewer improvements is the main part of it and as well as some governmental projects. Two repayment sources, the smaller portion on the governmental projects is to be repaid for by your property tax revenues. And then the big piece, which is your water and sewer improvements, is repaid for by net revenues of the water and sewer system. So no tax revenues is being used to pay that. So it kind of helps you with your tax rate budget as you're talking to these conversations this next few weeks, and you have been on the budget. Pretty standard to what you have done in the past, issuing certificates of obligation. I know you've done this for probably five years now in a row. Nothing has changed. The only different thing now is you're issuing a refinancing bond to help open up room for the new payments. I'll show you how that looks here in a bit. Nothing's changed from our last discussion with you other than we now have final numbers to show you. Through our conversation, you got your AA minus rating affirmed. Nice results and nice write-up here from Standard & Poor's. This is a public document to anyone that's trying to buy ComResponse or that bought ComResponse today. They got to see this beforehand and ahead of time. Nice write-up about your healthy fund balances, historically stable operations, and your conservative budgeting practices. That's a strong point in their criteria. They do see your tax base or your community benefiting from a university system and industrial residential retail sectors continuing to see some benefit there. Now they do make a comment about your debt, but it's still manageable in their eyes. And I know you've got the budgeting practices that where it is manageable. Outlook is stable. You want to see a stable outlook, meaning their expectation is that you will maintain that AA minus at least for the next two year horizon unless something drastically changes, right? So S&P is willing to hold this stable outlook AA minus unless a lot of things change over that two year horizon. With that, everyone's, there's a volatile market these days, and a AA minus going into the market with a AA minus is a big plus. There's just a lot of appetite for anything AA and higher. As you're an investor, you wanna flight to quality is what we call it. I'll show you a slide how that ended up. Here's how your tax base came in by the time Hunt Appraisal District certified it, Hunt County Appraisal District. So a slight growth compared to last year. We were looking at a lower amount in April. So this is going to be beneficial to you as you talk about tax rate. You have not seen this slide before. Why? Because usually we do a competitive sale of your bonds or your certificates and you come in with bids and we show you here's who was the lowest bidder. We had a little bit of a more different financing this time, so we recommended that you do a negotiated sale with BOK Financial. as your bond underwriter. They've won a couple of your certificates in the past and they were a natural firm to sell your bonds in the market. So this morning they went out to the market at 9 a.m. promptly and they took orders for the city's bonds and certificates. And these are the maturities each one of your payments starting in 2028 going to 2051. This is a 25-year transaction and you can see that you got at least one times order if not more, which means your bond transaction was oversubscribed. There was more bonds available, sorry, more demand for your bonds than bonds available. That's good. What does that help you do? It helps you push the investors to lower the interest rates and see who sticks around for a lower rate. And you got $31.5 million of orders for your bonds. We only came to market this morning with $11.2 million of bonds. So that allows the city to have some leverage and the bond writer to kind of push the investors and say, okay, we're gonna lower it a little bit. Uh, and it allowed you to lower, uh, around three basis points of interest cost compared to the numbers I showed Jamie yesterday in our conversations, you lowered that interest expense today by $44,000 over the life, the 25 year life of the certificates. So that's a nice result. Uh, again, strong appetite for commerce, uh, paper to the commerce paper. And these are all the investors that bought your bonds. A lot of funds, hedge funds, bonds, bond shops, financial institutions that buy these type of investments. You can see the amount of forwards they put in and where they're located and what the name is. So we just wanted to show you this because this is the first time we have this for commerce. And I think it really is, it tells the success of the bond sale. Here's the numbers, again, $8.5 million going to the city's accounts at closing, which is August 27th. And you can see that we came in with a 0.23 debt service tax rate into this discussion, and where we ended up is a 0.2194, so kind of a 1.7 lower debt service tax rate that you need to service your existing and this new debt or proposed debt. So that's a nice result. I know that you're going to budget and you want to keep some of that tax rate available for other purposes, and this should definitely help you do that. YOUR FINAL BORROWING COST IS 4.78% ON THE 25 YEAR CERTIFICATES. CERTIFICATES. I DO WANT TO SHOW YOU THE SECOND I DO WANT TO SHOW YOU THE SECOND TO LAST COLUMN. TO LAST COLUMN. THIS WAS CLOSER TO 23 CENTS, THIS WAS CLOSER TO 23 CENTS, MAYBE A LITTLE BIT HIGHER THAN MAYBE A LITTLE BIT HIGHER THAN 23.6 CENTS AND YOU KIND OF ENDED 23.6 CENTS AND YOU KIND OF ENDED UP LOWER ACROSS THE YEAR 2031. uh this is in line with the plan of finance that we discussed with you last time the idea is to get to the the red line and refinance again with a tax exempt tax exempt refunding at this point you'll be able to capture lower interest rates because right now restructuring is taxable when you do it on a tax exempt basis it's more cost effective for the city So we wanted to leave some room until you're able to hit a tax-exempt refinancing with tax-exempt bonds. So, you know, five years of room to allow you to do that and to allow your tax base to continue to expand and possibly grow into these payments. And if not, you always have the option to restructure some more of your payments as you see fit and you potentially have other projects in the pipeline. Water sewer side, Mayor Council, very healthy system. After this debt is issued, you'll have around $315,000 to $340,000 in surplus after you service this debt plus your existing debt. So your utility system is performing well and is able to absorb this without a utility rate impact. Again, this is a fixed interest rate, so it wouldn't change once you approve it today. The final schedule, again, August 27th for your closing. And as you finalize your budget, no payments on the debt until fiscal year 2027, so that you're able to fit this into your upcoming budget. Any questions? Mayor Council will be happy to address those.

Anybody have any questions? Thank you, yay.

Congratulations on strong results, thank you.

We do want to point out you should have this worksheet that shows you what those final tax rate numbers are projected to be. The tax rate that Hilltop brings to us is a pretty standard calculation based on the valuations provided by the Central Appraisal District. However, Hunt County Tax Office then takes those numbers and puts them into a state worksheet looking at a combination of collections plus some fund balance in our INS. And Hunt County adjusts that INS from the .21 down to .18. So in the budget adoption workshop that we had last week, we told you that it was going to be INS IMS rate of 0.187142 based on the county workshop. That number is now 0.188777. So it's slightly adjusted through the Hunt County's worksheet. But this doesn't really impact the budget that we've adopted or that we've proposed for adoption. So we'll make sure that you all are clear on how that's going to shake out for our budget.

All right. Do we have any other questions or comments? Do I have a motion?

I move to adopt an ordinance authorizing the issuance and sale of City of Commerce Texas general obligation refunding bonds taxable series 2026 and approving all other matters related thereto.

Second. I have a motion and a second to pass the series 2026 refund bonds. All in favor say aye. Aye. All opposed nay. Motion carries. Thank you very much. All right. Now the second or item number three is the first and final reading on considering all matters incident and related to the issuance and sale of the city of commerce, Texas combination tax and revenue certificates of obligation series 2026, including the adoption of an ordinance, authorizing the issuance of such certificates and approving all other matters related there to this Jamie.

Good evening again, mayor and council. So this is just a continuation of, uh, what Jorge was just talking about. And so when, uh, we went through the whole presentation, we discussed the refunding and the restructuring as well as the issuance of the new bonds. And so this item is the issuance of the new bonds.

Any questions or comments? Do I have a motion?

Move to adopt an ordinance authorizing the issuance and sale of the City of Commerce Texas Combination Tax and Revenue Certificate of Obligation Series 2026 and approving all other matters related thereto.

Second. I have a motion and a second to consider all matters on the issuance and sale of the City of Commerce Texas Certificates of Obligation Series 2026 including the adoption of an ordinance authorizing the issuance of such certificates and approving all other matters related to you. All in favor say aye. Aye. All opposed, nay. Motion carries.

Mayor, do you mind doing a roll call vote for that last one?

Yes, I will. We have a roll call vote. Mr. Henry? Aye. Mr. Starks? Aye. And for myself, aye. Ms. Becky? Aye. And Ms. Jim? Aye. All right. all right do we have any other business we need to carry forward now not at the special meeting no okay um please share uh our condolences with the business family that you have and we understand that it's quite Quite hard for you to be here. Thank you very much. All right. All right. No other business. I call this meeting to close it. Well, do I have a motion to close? All right. Close this meeting at 544.