Eagle Pass City Council approves refinancing of debt to save money

By: Jose G. Landa, Eagle Pass Business Journal, Inc., Copyright 2016

The Eagle Pass City Council held a special meeting on Tuesday, May,17, 2016 in which they unanimously approved to refinance certain debt maturities on outstanding bonds, including the City of Eagle Pass Combination Tax and Limited Pledge Revenue Certificates of Obligation, Series 1998 in the amount of $61,000 outstanding, City of Eagle Pass, Texas Combination Tax and Limited Pledge Revenue Certificates of Obligation, Series 2005 in the amount of $2,103,000 outstanding, Combination Tax and Limited Pledge Revenue Certificates of Obligation, Series 2011 in the amount of $1,832,000 outstanding, and Combination Tax and Limited Pledge Revenue Certificates of Obligation, Series 2012 in the amount of $975,000 outstanding, totaling the sum of $5,010,000 of city-owed debt to be refinanced in order to save money. The call dates on these bonds were for the month of March and July 2016.

Under agenda item No. 5, the Eagle Pass City Council and administration discussed and heard a presentation from City Financial Advisor Robert Tijerina of Estrada and Hinojosa LLP and City Bond Counsel Juan Aguilera from Escamilla and Poneck on the possible authorization of the issuance of “City of Eagle Pass, Texas Limited Tax Refunding Bonds, Series 2016 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.”

Tijerina proceeded to clarify that the refinancing was to lower the interest rate on outstanding debt on the proposed bonds in the net present value savings of $234,628 and a percentage saving of recorded bonds of 4.56% of the $5,010,000 in outstanding bond debt left over on the original notes.

Tijerina stated that the present interest rate on those bonds was at 3.469% and once the restructuring/ refinancing was done it would decrease up to 1.97%, depending on when they are taken to market.

“The goal is to lower your interest rate on your annual payment.” said Tijerina.

Tijerina discussed the details of the amounts of payment and debt in question which would total in outstanding, including interest of $6,100,000 on the life of the bonds and if refinanced under the proposal being considered would lower it to $5,800,000.

“Lowering our interest rate , lowers our payment . We have an overall savings of roughly $268,000, present value $234,000 at today’s rate, percentage savings of refunding bonds at 4.56%. Every time we have a percentage savings of 3% or more , we always recommend to our clients to go out there and refinance the debt.” added Tijerina.

The total amount of savings the city is looking at is approximately $268,000 on the life of the outstanding debt on those notes at almost $20,000 less a year, depending when those bonds are taken to the market.

“We’re not adding on any additional debt to the City of Eagle Pass. We’re not looking to interest the interest rate on the city’s existing debt.This is just like if we would refinance our home mortgage to lower interest and payment.” added Tijerina

Bond Counsel Juan Aguilar presented to City Council the set of plans and actions under the parameters order and ordinance proposal with a mandatory ceiling of under $6,000,000.

The parameters order is only good for six months and if the savings cannot be met and the time limit lapses, it is null and void and must be addressed once again.

Mayor Ramsey English Cantu called for a motion on the agenda item. City Council member Gloria E. Hernandez motioned for approval, seconded by councilwoman Yolanda Ramon. The motion to approve the refinancing of this city debt in order to save money was approved unanimously.

Mayor Pro Tem Rudy Villapando and Council member Luis E. Sifuentes were not present at this May, 17, 2016 meeting.