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City financial adviser recommends parameter bond sale to preserve flexibility on refundings
Summary
Hilltop Securities senior managing director Jason Hughes told Coppell council the city can use a parameter bond sale to preserve flexibility in volatile markets and outlined refunding candidates, including a city GO parcel and a sales-tax revenue issue.
Coppell — Jason Hughes, the city—s financial adviser at Hilltop Securities, briefed Coppell City Council members during the July 22 work session on options for refunding existing debt and on the use of a parameter bond sale to allow flexible pricing amid market volatility.
Hughes described a parameter bond sale as an authorization that delegates final pricing to named officers so the city can execute a sale when market conditions meet stated parameters. "It just gives us maximum flexibility," he told the council.
Why the city is considering refundings
Hughes said the city has two currently callable issues that are candidates for refunding on a tax-exempt basis, subject to timing rules that followed the 2017 federal tax-law change that eliminated advanced refundings. The two identified city issues were a 2013 certificates-of-obligation/GO combination (city-side) and a 2015 GO issue; the city-side maximum recommended par for refunding was $9.25 million with a target maximum yield of 3.5 percent and a minimum present-value savings threshold of 2 percent. Hughes estimated that if priced that day the city—s GO refunding could be near a 3.2 percent yield.
Hughes also identified a larger sales-tax revenue refunding candidate for the Coppell Reinvestment and Development Corporation (CRDC): a 2014 sales-tax-backed obligation with a recommended maximum par amount of $22 million and a later final maturity (2038) than the city GO bonds.
Savings estimate and legal limits
Hughes said the 2 percent savings threshold is measured as present-value savings and provided a present-value example of roughly $180,000 for the city GO refunding spread over a typical 10-year refunding profile. He explained that since the 2017 federal change, tax-exempt refundings must occur within a 90-day window before call dates to preserve tax-exempt status; otherwise, a taxable refunding may be used but at a higher interest cost.
Next steps and council questions
Hughes recommended a 180-day parameter authorization as a practical window (cities can authorize up to a year), delegate final pricing to the city manager and finance director, coordinate with bond counsel, and return to council for the formal authorization on a future agenda. Council members asked about public disclosure of parameter-authorized ranges, market incentives for bidders, the effect of tariffs on yields, and whether approving parameters creates downside risk. Hughes said the municipal market is large and competitive, that approved parameters are public but do not guarantee execution, and that the only material downside would be if market moves prevent the refunding from meeting the stated parameters; otherwise existing debt remains unchanged.
No council vote was taken on a bond authorization; the briefing provided staff direction for next steps if council wants to bring a parameter sale for formal approval.
Ending
Hughes said staff could place a parameter-bond authorization on a future agenda with bond counsel if council wishes to proceed.
