Thanks to some planned refinancing, Sherman is expecting to save $40,000 per year on certificates of obligation it issued in 2006, 2008 and 2009.
The Sherman City Council unanimously approved an ordinance recently to allow a refinancing of four previous bond issuances after Director of Finance Mary Lawrence explained the city’s financial advisory, Garry Kimble of Specialized Public Finance, alerted the city to the opportunity to refinance the older bonds at a lower rate.
“I love it when you save us money,” council member Terrence Steele said to Kimble before he began his explanation of the savings opportunity.
Kimble said the city’s series 2006, 2008, 2009 and 2009A bonds have an average interest rate of approximately 4 percent and go out to 2030.
“That current market would allow us to bring the interest rate down to 2.55 percent,” Kimble said. “The net savings opportunity in present value terms is over $500,000.”
The estimated savings from refunding the bonds is $550,000 over the 13-year period between 2018 and 2030. In the documents prepared for the council, city staff said the average savings would be about $42,000 per year. City Manager Robby Hefton said that kind of savings of taxpayer dollars is always welcomed.
“I know we’re in a growth mode right now and I know we’re talking about expansion plans and things like that, but we’re also looking at ways to just save money,” Hefton said. “I know $40,000 a year doesn’t sound like much on an $80 million budget, but to us, that’s an employee or more street material or that’s more library books.”
Lawrence said the funds obtained from the issuance of the bonds in 2006, 2008 and 2009 went toward a number of city projects, including work on Brockett Street, Washington Street, Pecan Grove Park, Canyon Creek Drive and the Center Street Sports Complex. Hefton commended Lawrence for her great working relationship with Kimble that identifies opportunities to save taxpayer dollars. He said city staff is always looking for ways to save money for the city and make the tax dollars stretch.
“We think it’s low hanging fruit,” Kimble said of the planned refinancing. “The industry standard saving percentage is minimum 3 percent net present value as compared with the face amount of the bonds being refinanced. We’re over 5 percent so we’re almost two times in the money. We’re not proposing to extend the original maturity dates of those originally issued bonds but we think there’s an opportunity to be had here.”
City staff said the rate on the refunding bonds was fixed on Tuesday and is expected to close on June 13. The approximately $178,000 cost of the issuance is included in the refunding bonds.
The city issued $18.8 million in certificates of obligation in March of this year to pay for work on city streets, bridges and the relocation of the city’s Blalock Park Fire Station. During the 2015-2016 fiscal year, the city issued $6.9 million in debt to fund the remodel of the Sherman Public Library and work on a number of street projects.
Last month, Hefton told the council he expects Sherman will issue more debt during the 2017-2018 fiscal year to continue the city’s infrastructure and transportation programs. Documents provided to the council during its April budget planning meeting show an expected total of $16 million in debt to be issued for work on city streets and parks next year, though Hefton said that amount may ultimately change.
The preliminary division of the proposed debt issuance for next year, shows $3 million going to work on Friendship Road, $5 million being used for Travis Street West, $2 million for work on Preston Club Road, $4 million for the construction of ball fields at Pecan Grove Park West and $2 million for additional city parks.