City councilors approved an ordinance Tuesday night for the issuance and sale of a combination tax and revenue certificate of obligation, securing what financial advisors called a “favorable” rate on the current market.
The 2008 series bond issue, totaling $5,455,000, will cover the city’s contractual obligations for two projects currently under way, including the stormwater drainage improvements and related street and utility infrastructure replacements, as well as street improvements scheduled across the community.
George Williford, senior vice president of First Southwest Company’s Fort Worth office, presented four bids from various banks and recommended the council approve a combined proposal from Frost Bank and First Financial Bank of Stephenville, at a rate of 4.06 percent.
While the recommended bid did not include the lowest rate, Williford said the call feature was “advantageous” for the city of Stephenville, allowing it to pre-pay or redeem the bond as early as February 2013 and not be subject to penalties.
“The penalty outweighs, in this case, the interest savings the city would have achieved,” Williford said.
Front Bank, in partnership with First Financial Bank, also bid a lower 3.91 percent rate, but the bond’s call feature was subject to a make-whole payment.
Other financial institutions submitting bids were Bank of America (4.29 percent) and The Independent Bankers Bank (4.5 percent).
Williford told the council the 4.06 percent bid itself was so low that First Southwest Company recommended it be approved. “If we had gone out on the market and got an underwriting expense, it would have come in at 4.3 percent or closer to what Independent Bankers had bid. To get 4.06 percent on a 20-plus year schedule is extremely favorable in the current market”
The combined certificate of obligation includes two issuances, including a $1,325,000 bond on a seven-year repayment for street improvements, and a $4,130,000 bond on a 25-year repayment schedule.
Annually, the city is scheduled to make two bond payments: a principal and interest payment due each February and a second interest payment in August.
Williford said he structured the debt service schedule in accordance with the city’s desire to create payments that would not exceed $550,000 annually.
Upon their approval, the council said they were glad to see a local financial institution come forward to hold a portion of the overall bond issue, which allows the municipality to conduct business locally.
City councilors also unanimously approved a resolution accepting the completion of work for Phase II of the long-term water supply project’s transmission pipeline.
By approving the resolution, City Administrator Mark Kaiser said the city could provide a final payment of $152,067.63 to Bowles Construction Co., Inc.
The total cost of the project, which was awarded to Bowles in January 2007, was $3,041,352.50, of which $2,889,284.88 had been paid.
Initially, the city had entered into a unit price contract for work at an estimated total cost of $3,128,937.50.
The resolution passed during Tuesday night’s meeting states the city has “observed the work and found it to be acceptable,” and authorized the city administrator to make the final payment to the contractor.
Councilors also awarded a bid to Mark Dowell of Dowell Well Service, the low bidder, in the amount of $24,950 to conduct a well site evaluation at the Dublin Pump Station.
The local company was recommended to the council by Troy St. Tours of HDR Engineering, Inc., based on the low bid, which came in $1,050 less than the bid for work submitted by Associated Well Services.
In a letter of recommendation to the council, St. Tours stated Mark Dowell Enterprises, Inc. “provides quality work in a timely and professional manner. Additionally, the company appears to have a solid financial condition, credit rating and payment history.
HDR Engineering claims to have conducted a background check on the two bidders via a telephone poll of owners and engineering firms for similar projects prior to making their recommendation to the city.