Beaumont council signals policy guardrails for refunding community facilities bonds

Beaumont City Council members on Monday discussed new parameters staff should use when reviewing opportunities to refinance or refund bonds tied to community facilities districts and community facilities taxes (CFTs), including a 3% net-present-value savings threshold or a $200 annual savings floor and special treatment for bonds with built-in tax escalators.

Council members and finance advisers said the guidance would let staff assemble candidate pools of CFDs that might be refunded together while avoiding deals that produce little or no near-term homeowner savings. Councilmember Martinez summarized the direction offered in the discussion: “3% savings, $200. If there's an escalator, we just need to make sure that there's minimal dis savings in year 1 and no dis savings after year 2.”

The issue arose as staff and outside advisors reviewed a group of callable CFDs and noted that some issues carry call premiums (for example, a “103” call premium) that can eliminate near-term savings for homeowners if the city refinances now. Tom Jacob of Stifel, the city’s financial advisor, explained that premiums are the market mechanism that lets multiple callable issues…