City Council approves issuance of $10 Million Bonds, raising property taxes
By: Jose G. Landa, Copyright 2015, Eagle Pass Business Journal, Inc.
The Eagle Pass City Council unanimously approved an ordinance authorizing the issuance of “City of Eagle Pass, Texas limited tax refunding bonds, series 2015,” and providing for the payment of the bonds by the levy of an ad valorem tax upon all taxable property within the city, authorizing the refunding of certain outstanding obligations, authorizing the execution of a bond purchase agreement, execution of an escrow agreement, delegating to certain city administrative staff and officials the authority to approve all final terms of the bonds, and making other provisions regarding the bonds and matters incident thereto during their regular meeting held on Tuesday, May 5, 2015.
The issuance of these new bonds, Series 2015, will raise the ad valorem property taxes by up to 7.6 cents per $100 valuation for all property within the city limits of Eagle Pass during 2015-2016 fiscal year. The tax increase is necessary to pay for the City of Eagle Pass tax refunding bonds, Series 2015, for an amount not to exceed $10 Million. This tax increase does not include any property appraisal value increase which the Maverick County Appraisal District may assess a property on the taxpayer’s property for the 2015-2016 fiscal year. If a taxpayer receives an increased property appraisal value, this will result in a double tax increase unless the taxpayer appeals their increased appraisal value before May 31, 2015.
The Maverick County Appraisal District issued its new property value appraisals to taxpayers for 2015 and mailed out these new appraisal values to individual taxpayers on May 1, 2015. Local taxpayers are receiving their new 2015 Maverick County Appraisal District property appraisals this week in the mail.
During discussion, City of Eagle Pass financial advisor, David Gonzalez of Estrada & Hinojosa, and Bond Counsel, Juan “Johnny” Aguilera, made a presentation to City Council regarding the financial and legal analysis of the not too exceed $10 Million Certificates of Obligation issuance by the City of Eagle Pass.
“What we are presenting is basically a savings opportunity” to the City of Eagle Pass, said Gonzalez.
Gonzalez presented a breakdown of the refunding summary which includes the refinancing of $4 Million with a net presence value savings of $167,778 and a percentage savings of refunded bonds of roughly 4% to the City of Eagle Pass. “This equates to roughly about $18,600 of savings a year to your general fund,” added Gonzalez.
Gonzalez presented City Council with a list of the series of previously issued city bonds that are eligible to be refunded under this new issuance of 2015 Series Bonds, including the combination tax unlimited pledge revenue series 2005 and the series 2011 City of Eagle Pass Bonds.
Gonzalez presented City Council the interest rates that the City of Eagle Pass is currently obligated to pay for the City of Eagle Pass Series 2005 and Series 2011 Bonds, which are higher than the current interest rates available in today’s financial markets. Gonzalez noted that the lower interest rates available today will result a net savings to the City of Eagle Pass approximately $167,778 and possibly up to $187,000 if City Council approved the refinancing of the Series 2005 and Series 2011 Bonds with the new Series 2015 Bonds.
“This is the current debt service that the city is paying right now under the two certificates of obligations, Series 2005 and 2011. The refunding debt service is the debt service payment that the City can enter into by refinancing the bonds,” said Gonzalez.
Gonzalez discussed that the net presence value savings being looked at by the City of Eagle Pass was $167,778 and a percentage savings of refunded bonds of roughly 4% if it chose to refinance these two Bonds, Series 2005 and 2011 with the 2015 Series. Future value savings to the City of Eagle Pass will be close to $187,000, said Gonzalez. “This is after all cost is included. This is net savings to the City,” added Gonzalez.
Gonzalez described the time table of events for the process to take effect after City Council approved it.
Gonzalez opined on the procedures recommended for the refunding bonds and the certificates of obligation to be followed by the City of Eagle Pass. “The reason we like to do them together is because instead of paying the ratings agencies and insurance companies twice, you only pay them one time,” said Gonzalez. “That will be additional savings to the city,” added Gonzalez.
Gonzalez stated that his company plans to price the certificate of obligations on June 2, 2015 and closure on the certificates of obligations Series 2015 will be on July 2, 2015. “Then you will be able to lock in the lower rates and now just be obligated to pay those lower payments,” said Gonzalez.
Gonzalez presented City Council with a breakdown of the analysis of the process which includes an increase of the City of Eagle Pass ad valorem tax rate in of $0.649 cents per $100 valuation if the City decides to proceed with the certificates of obligation of $8 Million compared with an ad valorem tax rate increase of $0.76 cents per $100 valuation if the City chose to approve up to $10 Million in Series 2015 Bonds.
“These numbers are preliminary. We won’t be able to lock in the actual numbers until we price the certificates of obligation,” said Gonzalez. This would occur on June 2, 2015. These numbers may vary if the current interest rates in the market were to change on June 2nd.
The estimated tax increases for an average home in Eagle Pass appraised at $108,000 under the $8 Million certificates of obligation would result in an extra $40 tax bill compared to a tax increase of $50 if the City chose to approve up to $10 Million certificates of obligations in its Series 2015. But if the Maverick County Appraisal District increases the appraised value of your $108,000 property, then the tax increase to the taxpayer would increase depending on the new 2015 MCAD appraisal value.
Gonzalez noted that under the refunding plan it would generate a one and a half cent savings on the City’s INS tax over a 12 year span.
City Council discussed the details and crunched numbers with Gonzalez and Aguilera in proceeding to finalize the plans to move forward with the issuance of the the 2015 City of Eagle Pass Certificates of Obligation for an amount not to exceed $10 Million.
Bond Counsel Juan “Johnny” Aguilera intervened and stated that state law only requires one reading of an ordinance instead of three readings for the issuance of bonds such as the one being discussed at the meeting.
The Eagle Pass City Council, composed of Mayor Ramsey English Cantu and Council members Luis E. Sifuentes, Rudy Villalpando, Gloria E. Hernandez, and William “Billy” Davis, unanimously approved the ordinance to seek up to $10 Million of City of Eagle Pass Certificates of Obligation Series 2015.
In addition to refinancing previous City of Eagle Pass bonds, the new City of Eagle Pass Series 2015 Bonds not to exceed $10 Million will finance public improvements needed in the community such as the City’s Public Safety Headquarters, Public Library, Street Improvements, Parks and Recreation projects, and other public needs.
