by ANDY SEVILLA
Kyle City Council members finalized the refinancing of debt used to fund Kyle Parkway’s extension Feb. 19 by authorizing the issuance of $13.72 million of General Obligation Refunding Bonds.
In doing so, the city will save $1.1 million in interest cost and will level out an expected $1 million increase in debt service next year to the same levels as this year.
Had council not issued the refunding bonds, Finance Director Perwez Moheet said a seven-cent increase on the property tax rate would have been necessary to cover the added debt load next fiscal year.
And with this “good news,” Kyle Mayor Lucy Johnson congratulates city staff, but cautions that due diligence must continue.
“City staff has worked very diligently with our financial advisor to be able to make this happen. However, even with this good news, we still need to continue looking for ways to make sure every dollar counts and Kyle residents are receiving quality services.”
The refunding will achieve 7.8 percent in present value savings, well over the 3.25 percent threshold the city has identified in necessary savings to refund bonds.
Robert W. Baird & Co. are the leading underwriters of the refunding bonds, with Citigroup as the secondary in that capacity. Moheet said a majority of the bonds will be sold “immediately” to large institutional investors, and a “small percentage” of the bonds will be held by the underwriters until the retail channels absorb them.
The debt being refinanced — State Infrastructure Bond (SIB) Loan II and 2007 Certificates of Obligation (CO) — was issued primarily to fund the extension of Kyle Parkway east of Interstate 35 to Dacy Lane, which was an element in attracting Seton Medical Center-Hays to Kyle.
In addition to the hospital, two new professional buildings, Lowe’s Home Improvement, Walgreens and several other businesses have opened along Kyle Parkway’s extension, where Walmart is slated to break ground later this year.
Moheet said the refunding bonds have a true interest cost (tic) of 3.0102 percent, down from the 4.25 percent interest rate the SIB Loan had and the 4.5 percent interest rate on the COs.
The ratings service, Standard & Poor’s, presented Kyle with its “A+” rating on these bonds, after evaluating the city’s financial position.
In its evaluation to assigning the rating, the agency cited Kyle’s access to Austin’s diverse economy, a resilient tax revenue that weathered the national economic downturn and strong finances.
“I am extremely pleased at the results of our efforts to refund a portion of the city’s existing debt,” Moheet said. “Anytime we can save the Kyle taxpayers $1.1 million in interest costs is a significant achievement for our entire community.”
“This is just another example of how the city of Kyle is leaving no stone unturned to be sure the Kyle taxpayers are getting as much bang for their buck as possible,” Johnson said.