San Marcos Mercury | Local News from San Marcos and Hays County, Texas

March 29th, 2010
City says debt issue one of its best ever

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City of San Marcos Director of Finance Steve Parker.

STAFF REPORT

San Marcos city officials say their sale of $22.1 million in certificates of obligation (COs) for various public works projects is one of their most successful debt issues ever.

The city council approved the sale on March 2. The city used a new financing tool available to municipalities called “Build America Bonds,” for which the federal government subsidizes 35 percent of a municipality’s interest payments during the life of the bond issuance.

“This is our most successful bond sale ever, due to the city’s strong financial position, bond rating upgrade and market confidence,” San Marcos Mayor Susan Narvaiz said.

The city realized a net taxable interest rate of 3.588 percent, estimating a savings of $1.5 million for San Marcos taxpayers over the 20-year life of the bonds. As a result, the city will save just more than $73,000 per year, compared to traditional tax exempt bonds.  In 2009, the city issued bonds at a 4.6 percent interest rate.

“San Marcos also will realize and additional $730,000 of interest savings over the lifetime of this issuance by using certificates of obligation rather than selling revenue bonds for enterprise projects in our electric and water/wastewater utilities,” San Marcos City Manager Rick Menchaca said.

City of San Marcos Director of Finance Steve Parker said three factors made the bond sale successful — a recent upgrade for the city’s bond rating by Standard and Poor’s, the timing of the sale for less competition in the market and strong support from an underwriting syndicate which consisted of Wells Fargo, SAMCO Capital Markets, Estrada Hinojosa, and Crews & Associates.

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