Council hears options for bond refunding; staff recommends 'parameter sale' flexibility
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Summary
Staff updated council on three callable bond series and recommended the council consider a parameter sale to allow market-timed refunding if conditions meet preset thresholds.
City finance staff updated the council on a possible refunding of callable bonds and described a “parameter sale” as a way to allow a market-timed refunding within council-approved limits.
Finance staff identified three issues with callable debt: Series 2013 certificates of obligation, Series 2015 certificates of obligation, and Series 2014 sales-tax revenue bonds. Kim, a finance staff member, summarized recent market analysis prepared with the city’s financial advisor and said that market conditions at the time of the meeting were generally unfavorable for refunding most of the series. For the 2013 COs, staff reported a projected net present value (NPV) savings of roughly 1.6% if refunded under current market rates; the 2015 COs and the 2014 sales-tax bonds would have yielded negative NPVs under current rates.
What staff proposed: Kim described a parameter sale as a method where council pre-approves transaction limits — maximum par amount, maximum interest rate, final maturity date and minimum savings threshold — under Local Government Code Chapter 1371 so the financial advisor can execute a sale quickly if market conditions later meet the council’s criteria. "This approach… gives the city the flexibility to complete the bond sale, at the most advantageous time within the council approved, limitations," staff said.
Council response and next steps: Councilmembers asked for more detail on fees and how Hilltop Securities (the city’s financial advisor) would be compensated; Kim said she would confirm whether Hilltop’s fee would be flat or performance-based. Councilmembers also asked that Jason (the financial advisor at Hilltop) be present at a future work session to walk through parameter options and the recommended thresholds. Several councilmembers said they were not ready to refinance under current market conditions but supported getting further education and detail from Jason before making a commitment.
Ending: Staff recommended preparing parameter-sale parameters and bringing Jason Hughes from Hilltop Securities to a future meeting to advise the council. No formal bond sale authorization was given at the work session.
