Rating helps city score low rate for bond issue

Kilgore News Herald (TX)

Jan. 28--The City of Kilgore's credit score helped save the community about $240,000 on existing debt service Tuesday while securing a low interest rate on $4.1 million in bonds to fund utility improvements.

In 2014, the city's S&P Rating was upgraded to AA, and Standard & Poor's affirmed the same label last week, just in time for Tuesday's competitive bidding for general obligation bonds to fund long-needed work on local water and wastewater systems.

According to Dusty Traylor of Traylor & Associates, "For a city this size to have a AA rating is very, very good," he said Tuesday evening. "That represents a lower credit risk to investors and helps us earn lower interest rates."

Praising Kilgore City Manager Josh Selleck and his staff, Traylor noted S&P highlighted six aspects of the local municipality that contributed to the rating: strong management, strong budgetary performance, very strong budgetary flexibility, very strong liquidity, strong institutional framework and a strong debt and contingent liability position.

The rating "helped carry the day today as we went to the market and received bids on these financings," Traylor said.

By the end of the day and this week's council meeting, he noted, the city had secured an interest rate of 2.99 percent over 20 years for $4.1 million in bond revenue.

"You guys locked in a really, really great rate today on these," Traylor said, with estimated debt service of $280,000 annually in the next two decades, between $15,000 and $20,000 better per year than the city anticipated. "It's real money."

The funds will be deposited in Kilgore's accounts Feb. 21 from the bond-purchaser, FTN Financial Capital Markets.

Separately, the issuance and sale of City of Kilgore General Obligation Refunding Bonds ended with an overall reduction of 6.32 percent on existing debt, Traylor said, an average of $19,976 per year in savings through August 2028.

"Again, very excited about these results and the number of bids you received," he said. "These bonds were very well-received. Congratulations and kudos to the councils, kudos to the staff and the City of Kilgore. This is a great result."

Kilgore's five council members accepted both bond issues unanimously Tuesday.

"The reason we're taking this debt is because we have some capital needs in our utility system, both on the water and wastewater sides," Selleck noted. In the end, "This is about half of a percent better than my best expectations."

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