City receives 3.76 percent interest rate on certificates of obligation

By Michael V. Hannigan/HCNow

The Athens City Council approved issuing certificates of obligation Monday night to raise about $12.1 million at an interest rate of 3.76 percent.

The move will provide the majority of funding for the $12.8 million Capital Improvement Projects plan the council approved in August. Included among those capital improvements are $10.5 million for a municipal buildings project (Cain Civic/Aquatic Center, police department) and $1.4 million for the Texan Theater.

Mayor Jerry Don Vaught said, “I’m very excited about this. I think it is going to be such a huge win for Athens to get some capital improvements that are desperately needed and plus get to fix the Cain Center.”

The interest rate is higher than originally expected.

The City’s financial adviser is Hilltop Securities. Hilltop representative Marti Shew on Monday told council members, “I will note that our market is getting hammered right now in terms of interest rates. We have had a lot of volatility in terms of the rates as a result of the election. We’re actually in one of the largest spikes in interest rates that we’ve seen since 1981.”

City officials were hoping to get an interest rate below 3 percent, but even at the higher rate officials say the bond issue will not impact the City’s ad valorem tax rate. They term of the debt, however, stretches to 23 years instead of 20.

Shew pointed out that the City’s rate is still under 4 percent.

“Relatively speaking, we’ve gotten very spoiled with some crazy low rates that have been at historical lows, but in the grand scheme of things we still feel that the market is very solid in terms of the rate its provided and at 3.76 we think we should be pleased,” she said.

Councilman Joe Whatley said, “We got lucky. Those rates are going to climb and climb fast. I think we got in just underneath a big jump.”

Shew also pointed out that the City’s bond rating had climbed four spots since the last time it issued bonds (2004), which is a testament to the City’s financial integrity. The City was rated A+.

Shew said only 20 percent of Texas cities attain that high of a rating.