The city is paying off old debt - to make way for new debt.
The Stephenville City Council approved a resolution geared at reducing future debt payments at its meeting Tuesday.
City Administrator Mark Kaiser said the move will stabilize the city's I&S (interest and sinking), or debt rate, and the ordinance will allow the city to avoid accruing higher interest rates and payment amounts.
In regards to the coming fiscal year's tax rate, Kaiser said the proposed rate for the 2010-11 fiscal year will be addressed during a series of budget work sessions which will begin next week and continue through September. The city has set Sept. 14 as the tentative date for a public hearing on the 2010-11 budget and tax rate and anticipates adopting the tax rate at a special meeting on Sept. 21.
The resolution, which received full support from council Tuesday, authorizes city administration to call a portion of "The City of Stephenville, Texas Combination Tax and Revenue Certificates of Obligation, Series 1996" for redemption prior to the final maturity date of Feb. 15, 2016.
According to information provided on the city's Web site, www.ci.stephenville.tx.us, the city council authorized the issuance of $2 million in bonds in May 1996 for capital improvement projects. The bond was approved to fund the acquisition of fire equipment, the purchase and renovation of the building that is now City Hall and the adjacent parking lot, the construction of the municipal service center and purchase of related equipment and the renovation of the former City Hall to serve as the public safety building.
While Kaiser recently told the council that he will not recommend the funding of capital improvement projects, annual street and utility repairs or equipment replacement during the 2010-11 fiscal year, he said Tuesday that paying off existing debt ahead of schedule will make way for the issuance of new debt during the 2011-12 fiscal year's budget planning process to fund such projects and needs.
Kaiser said the city will pay off about half of the debt, $180,000 early and without penalty, and that the early payment will add up to an estimated $30,000 in savings over the next five years.
"The redeemed certificates, in the aggregate principal amount of $180,000, are hereby called for redemption on February 15, 2011, at a redemption price equal to the principal amount thereof plus accrued interest to the date of redemption," the ordinance states. "Interest on the Redeemed Certificates shall cease to accrue on the redemption date."
Following a question by council member Alan Nash, Kaiser said that the funds to pay off the debt will be derived from money collected from the I&S rate and area taxpayers during the coming fiscal year. The I&S fund is strictly dedicated to debt service.