Josephine approves $14.995 million certificates of obligation for water, sewer and drainage projects

The City of Josephine on Sept. 8 adopted an ordinance authorizing the issuance and sale of combination tax and revenue certificates of obligation, Series 2025, to fund water, sewer utility projects and stormwater/drainage work.

Jim Savas of Hilltop Securities summarized the competitive sale and financing plan. He reported a final par amount of $14,995,000 from the morning’s bidding and said the transaction benefitted from a AA-minus rating for the city. "We end up selling $14,995,000 of bonds," Savas said, adding that after premium and financing costs the city can deposit roughly $15,047,000 into the project fund. The transaction’s amortization is 25 years with a 10-year par call feature, he said.

Savas and staff told council the estimated true interest cost was about 4.57% and that, based on conservative projections, the city’s interest-and-sinking (I&S) ad valorem tax rate would not need to increase to cover debt service. Staff also explained that $3.79 million of the issue will cover general fund projects and approximately $11.257 million will be paid from utility fund net revenues.

Council members asked about blank fields in the draft ordinance (par amount and interest rate) and were told the ordinance will be completed with the final numbers prior to submission to bond counsel and the Texas attorney general for review. One council member expressed concern about total municipal debt levels per resident; staff replied that the utility fund will repay the utility portion and that timing, reserves and cash flow projections indicate coverage of debt service without a utility-rate increase.

Council moved to adopt the ordinance and the motion carried, recorded in the minutes as 4–1.

Next steps: bond documents will be submitted to the Texas Attorney General’s municipal bond review unit and the sale is expected to close on Sept. 24, 2025, provided the AG’s review is completed.