Sherman issues $34M in debt amid historic low rates
In an attempt to take advantage of record or near-record low interest rates, Sherman issued nearly $34 million of bonds this week.
The bonds came in two separate issuances, including $29 million that was previously discussed by city leaders in recent months. In late 2020, city officials considered issuing this debt ahead of projects so that the city could utilize historic lows on interest rates. City staff felt a decision needed to be made quickly, as rates were not expected to remain low much longer.
These funds will be utilized for routine fleet upgrades for the city. The vehicles that will be purchased include a dump trick, bucket truck, front-loader truck, fire engine and ambulance, among others.
Over the course of the lifetime of these bonds, the city will be paying as little as 0.33 percent interest on the debt.
"I am very pleased to announce that you are the only game in town in the Texas market today. So, you have the whole spotlight to yourself," Financial Advisor Garry Kimball said. "With your strong AA bond rating, which was affirmed by Standard & Poor's just last week, I am proud to say we had a very strong turnout."
The first bond package was for $5 million, and the city saw 8 bidders. The winning bid will see a true interest rate of just 0.33 percent for the five-year lifespan.
"That's as close to free money as you are going to get," Kimball said. "I've been doing this for 28 years and I don't think I've read off a rate that low for a deal like this."
The city also issued a second bond for $29 million during Monday's meeting. This bond was seven bids, with the winning bid featuring a 2.077 percent true interest rate.
Kimball said both bonds were favorable to the city. Initially, he expected that rates were on the rise about six weeks ago when a spike occurred. However, in hindsight, this appears to have been an overreaction by the market and conditions have since stabilized.
Council member Shawn Teamann noted that the bond is lower than the $30 million that the council considered. Kimball noted that is due to the nature of the bond type, which features cash on delivery by the buyer. In essence, the city will still be getting the $30 million, but will only need to repay $29 million in total.
Sherman Community and Support Services Manager Nate Strauch said he is uncertain what these funds will be used for, noting the city's desire to issue while the markets are favorable. However, he said this will likely pay for projects, including the new police station along FM 1417, that move forward in the next two years.
"It will likely be for road projects and that sort of thing," he said. "Anything that we plan to do over the course of the next two years could come out of this pot of money, including the new police station."