Red Oak council authorizes $14.5 million pension bonds to lower TMRS contribution

The Red Oak City Council voted 5-0 on ordinance 26-019 to authorize up to $14,500,000 in taxable general obligation pension bonds, Series 2026, to finance a lump-sum payment to the Texas Municipal Retirement System (TMRS).

City staff told the council the city's TMRS contribution rate rose from 6.98% to 19.5% effective Jan. 1, 2026, with actuarial estimates projecting a further increase to about 20.61% on Jan. 1, 2027. McRoberts (city staff) said financing a lump-sum payment would reduce the city's long-term TMRS contribution to below 13% based on current assumptions.

Andrej Alor of Hilltop (bond advisor) told the council the recommended bonds would be fixed-rate, taxable, and budgeted at roughly 5.5%–6.0% for planning purposes. "This would assist actually the city in having more budgetary flexibility by moving some of the payments from the general fund to the debt service fund," Alor said.

Council members asked about term and rate assumptions; staff said bonds would not exceed 20 years and that the ordinance delegates authority to the city manager and deputy city manager as pricing officers to complete the sale. The ordinance passed on a roll-call vote recorded in the meeting as 5-0.

The council did not set a final interest rate at the meeting; staff emphasized pricing and final structure will be set by the pricing officer and bond counsel prior to sale. The next procedural steps are implementation of the sale documents and the timing of bond issuance to occur before the council adopts the anticipated tax rate in August.