Council approves defeasance of portion of 2018 general obligation bonds using unspent proceeds

The Mineral Wells City Council on Tuesday approved an ordinance authorizing defeasance and redemption of part of the city’s 2018 general obligation bonds, using roughly $2 million in unspent bond proceeds and approving an escrow agreement to effect the transaction.

City staff told council that voters authorized two propositions in November 2017; bonds totaling $11,228,525.20 were issued March 18, 2018. Staff said all projects funded under the propositions are complete and about $2 million in bond proceeds — including accrued interest — remained unspent. Because some proposition language is too narrowly drawn to permit reallocation and federal tax-exempt bond rules require proceeds to be spent on qualifying projects within set timeframes, staff and bond counsel recommended defeasance of a portion of the 2018 issuance to remove the unspent proceeds from the city’s balance sheet.

Staff described the next steps: purchase of State and Local Government Securities (SLGS) through the U.S. Treasury during an open SLGS window or, if the SLGS window is closed, purchase of suitable private securities to fund the escrow. Staff warned the council the U.S. government shutdown or SLGS availability could affect closing timing; if SLGS is unavailable, private security purchases would be a fallback option with modest additional cost.

A councilmember moved to approve the defeasance authorization and the council approved the ordinance 6–0.

Staff will continue to monitor SLGS availability and proceed to closing when appropriate; bond counsel will handle escrow arrangements and the city will report results when the transaction is closed.