By Mason W. Canales
Killeen Daily Herald
KEMPNER - City Council members will reissue bonds next month to refinance loans that paid for the construction of city hall.
During action taken Tuesday, the City Council chose to seek bids to consolidate two limited tax-note bonds issued in 2010 and 2011.
"The intent was always to refinance," said Jennifer Douglas, a managing director with Austin-based Specialized Public Finance, the city's financial adviser.
The two bonds are both seven-year loans, which will substantially increase the city's debt service tax if they are not refinanced for the 2013 year, said Douglas. It makes sense to extend their repayment period so the increase doesn't happen and the city's debt service tax stays about the same, she said. Failure to refinance could cost residents more money.
"By spreading (the bonds) out over a 20-year period, it will make it much more manageable," said Mayor Gene Isenhour, who noted the building should last the city more than 20 years.
Kempner council members originally agreed to the first loan of $425,000 in 2010 with an interest rate of 2.79 percent. The second $112,000 loan was issued to the city with a 2.94 percent interest rate in 2011.
Unlike other cities that have refinanced loans recently, the goal of this refinancing is not to save money by lowering the interest rate, but to extend the life of the bonds to keep the debt services tax low.
"We are trying to keep it at that lower amount by stretching it out," said Douglas. She didn't know if the city would receive a lower interest rate on the loans, but it is a possibility since the market for borrowing money is more in the city's favor than it was during 2010 and 2011.
Isenhour said the city originally couldn't receive a longer period for the loans because it had to finance them through limited-tax notes, which only allowed a seven-year option.
Contact Mason W. Canales at firstname.lastname@example.org or (254) 501-7474. Follow him on Twitter at KDHCoveEditor.