Nacogdoches council authorizes roughly $14.5 million in bonds to fund fire station, streets

The Nacogdoches City Council voted May 7 to authorize issuance and sale of the first tranche of Series 2024 general obligation improvement bonds, following a presentation on the competitive sale and projected fiscal impact.

Interim finance director Todd Simono introduced the item and asked the council to consider an ordinance to issue the first tranche of the voter-approved bonds. John Martin of Hilltop Securities told the council that S&P Global affirmed the city's credit rating at double A-minus and that the bonds were awarded through a competitive sale to Fidelity Capital Markets. "S&P Global affirmed the city's rating of double A-minus," Martin said, adding that the stable outlook reflected the city's tax base and recent financial performance.

Martin said the sale generated about $633,000 in premium to the city and that the par amount sold in the first tranche was roughly $14.5 million. He described sources and uses showing the largest allocations in the tranche are about $10.2 million for fire-related projects and about $2.5 million for streets; smaller amounts were allocated to airport, drainage, parks and recreation, and issuance costs. Martin said the true interest cost on the sale was approximately 3.98 percent and that estimated annual debt service for several shorter-term projects would be roughly $990,000.

When asked how soon the bonds could be paid off, Martin said the bonds carry a nine-year par call, with a likely call date of Sept. 1, 2033, after which they could be refinanced if market conditions allow. "You can always refinance those bonds at a lower rate at that point in time," he said.

A council member moved to adopt the ordinance authorizing the issuance and sale of the bonds; the motion was seconded and approved by voice vote. The council did not provide a recorded roll-call vote in the transcript; the chair declared the motion carried.

Why it matters: The bond proceeds will fund public-safety and infrastructure projects the city placed before voters; staff said the sale's competitive pricing and the premium will reduce net borrowing costs. Martin and Simono emphasized that modest growth in taxable value could limit the tax-rate impact: staff projected about 1 percent growth and said that would increase the interest and sinking tax rate "a little over a nickel."

Next steps: The ordinance authorizes the city to issue the bonds; staff will complete closing and apply bond proceeds to the listed project budgets per the sources-and-uses schedule presented to the council.