Red Oak approves $16.8 million certificates of obligation for streets, building renovations; officials say no tax-rate impact expected

The Red Oak City Council on Tuesday adopted Ordinance 25-048, authorizing the issuance and sale of the City of Red Oak, Texas Combination Tax and Revenue Certificates of Obligation, Series 2025, to fund capital projects including streets, building renovations and other infrastructure.

City financial advisers Hilltop Securities presented the plan of finance and recommended issuing certificates that will net approximately $16,802,000 in proceeds. Hilltop’s representative, Jim, said the final issuance amount was lower than the previously authorized cap after the city downsized the issue to match the capital program. "This is actually far below what we initially proposed as a cap," Jim said, adding the structure is a combination tax-and-revenue pledge that will be budgeted within the city’s debt service (ad valorem) tax.

Hilltop described a highly competitive sale: the firm reported 12 bids on the issue, a larger field than typical for the market. Jim said the low bid came in at about 4.001435 percent and that competitive pricing, use of premium bids and lower issuance costs reduced the city’s total principal-and-interest cost by roughly $1,153,000 compared with earlier estimates. He also recounted the range of bidders, naming national and regional firms and noting that some bidders appeared to intend to hold the bonds in their own portfolios.

Staff said the city previously published a notice of intent to issue certificates with a cap not to exceed $38,500,000; that notice ran in the Waxahachie Sun on Aug. 13 and Aug. 20. The adopted ordinance authorizes the documents necessary to complete the sale; staff said the issuance will be submitted for review to the Texas Attorney General’s office, which typically requires about 15 working days for municipal bond reviews. Staff anticipates closing on Oct. 22.

Staff told the council they do not expect the issuance to affect the city’s ad valorem tax rate. Councilmember Lightfoot moved adoption of the ordinance and Councilmember Franklin seconded. The motion passed 5-0.