Department of Finance
Reference: 2016 Revenue Bond Refunding Ordinance
To: Mayor Gregory Mills and Members of City Council
Through: Michael P. Martinez, City Manager
Prepared By: Catrina Asher, Finance Director
Date Prepared: September 15, 2026
PURPOSE
To request City Council’s approval to refund the 2016 Water Activity Enterprise Bonds to secure a lower interest rate.
BACKGROUND
This proposal was presented to City Council at Study Session on September 8, 2026. The following background information is taken from the staff report from that meeting.
In 2009, the City issued $30,165,000 in water activity enterprise bonds to fund improvements to the City’s water and wastewater facilities. Those bonds carried interest rates ranging from 2.00% to 5.25% annually and were to be paid through 2037.
In 2016, the City refunded the 2009 bonds in order to secure a better interest rate. The new bonds accrue interest at rates ranging from 2.00% to 5.00% annually and held the same maturity date of 2037. These bonds are currently outstanding and had a balance as of December 31, 2025 of $12,420,000 and $4,205,000 in the water and wastewater funds, respectively.
The 2016 bonds are now eligible for refunding. Analysis of those bonds by the City’s Municipal Advisor (Hilltop Securities) indicates that a refunding could lower overall interest costs. At this time, the estimated savings of refunding would be $59 thousand annually, or $650 thousand through the remainder of the life of the bonds. If refunded, the bonds would mature in 2037, following the same timeline as the original 2009 bonds.
If the bonds were to be refunded, the process and approvals needed would be similar to the issuance of new bonds. The steps and proposed timeline are listed below:
- September 8 - Staff proposes bond refunding at Study Session.
- September 15 - Staff presents Borrowing Ordinance for initial approval.
- October 6 - Staff presents Borrowing Ordinance for final approval and a budget amendment for the issuance costs and repayment of the existing bonds.
- September and October - Staff prepares borrowing documents, including the Preliminary Official Statement which includes pro forma financials.
- Mid-October - Staff meets with rating agency to review proposed issuance.
- November 17 - Competitive bond sale is held.
- December 3 - Bond sale is closed and funds are received.
It should be noted that the economy and borrowing rates can change quickly and those changes can have an impact on the savings potential from a refunding. Staff will work with the City’s consultants to monitor interest rates and may delay issuance if rates increase to a level that no longer provides savings to the City.
CRITERIA BY WHICH COUNCIL MUST CONSIDER THE ITEM
The bonds in question have been outstanding for a long enough period of time to be eligible for refunding. This proposed refunding would not extend the repayment timeline compared to the existing bonds. This refunding will require the City obtain a bond rating which is factored into the costs of this issuance.
FINANCIAL IMPACT
The proposal to refund the 2016 bonds would save approximately $650 thousand in interest costs over the remaining life of the bonds without extending the repayment timeline.
Bond issuance and refunding requires some out-of-pocket costs, including payment for bond counsel, financial advising and underwriting costs. Issuance costs for a refunding of this size would be approximately $276 thousand. This amount is factored into the estimated savings of the refunding.
Because this is a refunding, this would involve issuing new bonds to pay down the old bonds. This means that a budget amendment would be needed to appropriate the issuance costs and the amount due to the original bondholders to repay those bonds. Staff also recommends budgeting the inflow of funds from the new borrowing to ensure the water and wastewater funds remain balanced.
STAFF RECOMMENDATION
Staff recommends approval of the Bond Ordinance as presented.
Attachments:
Ø Bond Ordinance
Ø Presentation
Note that the following documents related to this issuance are approved as to form by Bond Counsel and are on file with the City Clerk for review upon request:
Ø Continuing Disclosure Certificate
Ø Notice of Public Sale
Ø Paying Agent Agreement
Ø Preliminary Official Statement (draft form)