Results from the General Obligation or “GO” bond refinancing that occurred last month for interest cost savings are positive. Before I give you the specific results of the refinancing, I’d like to give you some background information on our property tax supported debt program which includes all of our GOs, Certificates of Obligation, and Tax Notes.
With respect to legal limitations, the City’s charter provides that our property tax supported debt cannot exceed 10% of the City’s total assessed valuation. For FY 2011, the City’s total assessed valuation was $82.7 billion providing a debt ceiling of $8.3 billion. The City’s outstanding property tax supported debt was $1.3 billion which is well below this debt ceiling established under the charter.
In addition to the legal requirements, we actively manage our debt programs. Our property tax debt plan is a comprehensive long-term plan that is updated at least annually.
Through this plan, we manage our financial capacity while maintaining flexibility to adapt to changing economic conditions and working to provide sizeable financial resources to apply to our significant capital improvement needs. The most recent example of this work is our proposed $596 million GO bond program set for a vote on May 12th.
Our property tax supported debt is rated “AAA” by Fitch Ratings, Moody’s Investors Services, Inc.(“Moody’s”), and Standard and Poor’s Ratings Group. This is the highest rating achievable and San Antonio is the only city with a population of more than 1 million with a “AAA” bond rating from all three major rating agencies.
These ratings were affirmed with the bond refinancing we did this past month. This refinancing of our debt reflects our on-going debt management and provided an excellent opportunity to save interest costs.
Refunding Bonds in the amount of $33,410,000 were priced on March 27th by a syndicate led by Southwest Securities, Inc., Senior Book Running Manager; M.E. Allison & Co., Inc., Co-Senior Manager; and RBC Capital Markets, LLC and Samuel A. Ramirez & Co., Inc., Co-Managers.
During the pricing, there was significant demand in the market for the City’s bonds, generating $220 million in orders. The refunding transaction produced total savings of $4,761,595 with annual savings of approximately $366,277. Net present value savings on the transaction was $4,255,084 or 11.6% of the refunded obligations. The true interest cost on the transaction, which represents the total cost of obtaining debt financing on this bond transaction is 2.39%.
This transaction included the services of: Coastal Securities, Inc. and Estrada Hinojosa & Company, Inc., as the Co-Financial Advisors, and Fulbright & Jaworski and Escamilla, Poneck & Cruz, as the Co-Bond Counsel.