City-issued $10 Million Bonds to increase Ad Valorem Property Tax Rate
By: Jose G. Landa, Copyright 2015, Eagle Pass Business Journal, Inc.
The Eagle Pass City Council approved an ordinance authorizing the issuance of “City of Eagle Pass, Texas combination tax and limited pledge revenue Certificates of Obligation, Series 2015″ for the sum of up to $10 Million at their Tuesday, June 2, 2015, regular meeting, requiring an ad valorem property tax rate increase of 6.9 cents for every $100 valuation to City of Eagle Pass real property owners in order to pay for these bonds during the next 20 years.
City of Eagle Pass Financial Advisor David Gonzalez of Estrada & Hinojosa and Bond Legal Counsel Juan Aguilera of Escamilla & Poznecki presented City Council with the financial and legal analysis for the approval of the issuance of up to $10 Million Certificates of Obligations (Bonds).
Gonzalez advised the City Council that the maximum amount of the Certificates of Bonds will be $9,996,914 and the amount of the ad valorem tax to be levied to pay for these bonds will be $0.69 per every $100 valuation. The interest rate on the bonds will be near 2.79 % if the City of Eagle Pass approved to finally go forward with the bonds and lock in the interest rate.
“We have the post-pricing presentation. We priced the certificates of obligation yesterday and this is a report as to the outcome of the pricing,” said Gonzalez.
Gonzalez advised City Council that if they decided to move forward with the bonds, then they would proceed on closing on the financing in order to lock in the low interest rate of 2.79%.
Gonzalez noted that his firm had gone to the financial markets a day earlier due to better levels of pricing and interest rates availability, which would amount to a savings for the City of Eagle Pass of close to $100,000.
“When the pricing took place there was a lot of interest in purchasing the credit of the City of Eagle Pass,” added Gonzalez.
Gonzalez presented City Council a list of the projects and sources of usage of the bond funds to be borrowed.
“If you see, we have a par amount of $8,935,000 and a premium of $1,061,914 and under that where it says uses of funds, under project funds we have $9,805,000 and the cost of issuance is $127,403,” said Gonzalez to City Council.
Gonzalez noted that due to the City of Eagle Pass’ high credit rating of AA by Standard & Poors, the City of Eagle Pass will not need to purchase any bond insurance on these $10 Million in bonds providing the City a savings of approximately $70,000.
Under debt service summary, Gonzalez stated that the par amount of $8,935,000 had a 20 year maturity and that the interest rate 2.797% annual average payment would be $652,106 and required interest and sinking fund increase would be at $0.43 cents per $100 valuation.
Gonzalez presented City Council spreadsheet of the city’s current INS tax structure and compared it to the overall outlook after adjusting in what was being looked at.
Gonzalez then stated that under the net assessed values there had already been an increase.
“It’s even a lower impact to the city based on the new numbers that have come out from the appraisal district,” added Gonzalez. The Maverick County Appraisal District increased the property tax appraisals for 2015.
Gonzalez stated that under all the numbers being reviewed, the ad valorem tax rate increase would be $06.9 cents per every $100 valuation.
“The certificates of obligation, increase is for $04.7 cents and the increase to occur naturally is at $0.23 cents. So you are looking at a total INS for next fiscal year of $06.9 cents,” said Gonzalez.
Currently, the City of Eagle Pass taxpayer is paying $ 0.510724 per $100 valuation. With the new proposed increase it will be at $0.58 per every $100 valuation.
Gonzalez presented City Council a time table of events stating that based on the time table the city would receive the funds by July, 2, 2015.
Bond Counsel Juan “Johnny” Aguilera and City Council collectively discussed certain issues pertaining to the ordinance being issued on the certificates of obligation.
“If you would like to proceed, we would need a motion to adopt the ordinance as presented to solidify the sale,” said Aguilera.
After discussion, the City Council unanimously approved the ordinance authorizing the issuance of the Certificates of Obligations and authorized City Financial Advisor David Gonzalez to lock-in the interest rate and Bond Counsel Juan Aguilera to proceed with the legal documents for the issuance of the Certificates of Obligations.
The almost $10 Million Certificates of Obligations will require City of Eagle Pass taxpayers to receive a 6.9 cents per every $100 valuation tax rate increase for 2015 in addition to the Maverick County Appraisal District’s increased ad valorem tax appraisals of their properties, like a double tax whammy. The City of Eagle Pass will raise the tax rate from its current $0.510724 cents per $100 valuation to $0.58 cents per $100 valuation in 2015 or this year.
