Potential Savings of $25 Million through Bond Refundings
CORPUS CHRISTI, TX – On March 28, 2017, the City Council authorized the issuance of at least three bond issues that have the potential of saving the City of Corpus Christi an estimated $25 million. The City Council was very pleased with this latest news presented by the City’s Financial Services Department.
That impressive amount is the result of several transactions. The first transaction will be the refunding of the City’s Utility System revenue obligations to the Bureau of Reclamation for the construction of Choke Canyon Dam. The projected net present value savings for this transaction is approximately $9.1 million. The second transaction will be a loan from the Texas Water Development Board through its Drinking Water State Revolving Fund to refund bonds previously issued for the construction of Mary Rhodes Pipeline, Phase 2. Projected savings from this transaction is over $14 million. The third transaction will be the refunding of any outstanding Utility System revenue bonds that would generate savings. In the current market environment, the projected net present value savings of this transaction is approximately $1.9 million.
The “refunding of a bond” occurs when a lower interest rate is obtained to generate savings.
Financial Services Director Constance P. Sanchez says the interest rate for the Texas Water Development Board bond has already been negotiated at rate of 1.77% and will generate a net present value savings for the City of $14 million over the remaining life of the 29-year loan.
Sanchez says the time is right for these bonds to be refunded because although interest rates are currently low, they have begun to increase. “The sooner we get these lower rates locked in, the better,” says Sanchez. “It will mean a significant savings for the citizens of Corpus Christi.”
For more information, contact Financial Services Director Constance P. Sanchez at (361) 826-3227 or at ConstaceP@cctexas.com.