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Round Rock council awards $115 million in debt, Type B agrees to cover $20 million in CO debt service
Summary
The Round Rock City Council approved the sale of $90 million in general obligation bonds, $20 million in combination tax and limited revenue certificates of obligation and $5 million in limited tax notes; the Type B (transportation economic development) corporation agreed to pay debt service on the $20 million COs.
The Round Rock City Council voted unanimously Thursday to award three debt sales totaling $115 million to finance parks, transportation and fleet needs and to accept an agreement by the Round Rock Transportation Economic Development Corporation (Type B) to pay debt service on $20 million of the certificates of obligation.
The council approved the sale of $90 million in general obligation (G.O.) bonds to fund Proposition A from the 2023 voter-approved bond program, $20 million in combination tax and limited revenue certificates of obligation for the city’s road program and $5 million in limited tax notes for fleet replacement. Gary Kimball, the city’s financial advisor, presented results from competitive bids received earlier the same day and recommended award to the lowest bidders: Morgan Stanley for the G.O. bonds, Hilltop Securities for the certificates and Huntington Securities for the notes.
The sales produced strong market results, Kimball said. “All told, all 3 deals combined, we were about $780,000 below budget in terms of total debt service, over the life of the transactions,” Kimball said. He also reported that Standard & Poor’s affirmed Round Rock’s AAA general obligation rating, a factor that drew strong bidder interest.
City staff said the $90 million G.O. bond proceeds will continue work at Old Settlers Park, the $20 million COs will support the city’s road program and the $5 million in limited tax notes will replenish fleet assets. Kevin (city staff), who presented the related resolutions and ordinances, noted the COs tie directly to an agreement with the Type B board, which earlier that evening approved the arrangement for Type B to cover the CO debt service.
Council members asked for clarifications about market factors and maturities. Kimball explained that bid outcomes reflect varying investor demand by deal size and maturity and that stronger yields on the smaller, shorter issue are typical: “Each of these bidders have different accounts that they feed these bonds to… and it’s just a matter of who’s calling them and telling them that they’ll be buyers if they’re a winning bidder,” he said.
The council took three separate ordinance votes — one for the G.O. bonds, one for the combination tax and limited revenue certificates and one for the limited tax notes — and each passed on a unanimous roll call. Council members voting yes were Council Member Lee, Council Member Flores, Council Member Fleming, Council Member Ortega, Mayor Pro Tem Stevens, Council Member Montgomery and Mayor Craig Morgan.
The council also approved the staffing agreement with the Type B corporation for the certificates of obligation; Kevin said the Type B board had voted earlier to approve paying the annual debt service on the $20 million of COs. That resolution likewise passed on a unanimous vote.
No council member proposed an amendment or opposed the sales during the meeting. City bond counsel Richard Donahue of McCall, Parkhurst & Horton was present in the audience during the discussion and was noted by staff as available to answer legal questions.
What’s next: With the council’s vote to award the sales and approve the Type B agreement, city staff will proceed to closing and deposit of proceeds according to the sale schedule presented during the meeting.
