The Woodlands Township will see expected savings totaling $4.5 million in the coming years after two bond issuances from 2001 and 2010 were recently refinanced with lower interest rates.
The savings from the refinancing will be redirected from debt service funds to other uses in the general fund and capital expense budgets, officials said.
Monique Sharp, the township’s assistant general manager for finance and administration, said she and other staffers have been working since July to refinance two different bond issuances — one from 2010 during a transition from the former community associations model to the township was occurring, and a second that was originally issued in 2001 and then refinanced in 2010.
The 2001 bond issuance was used for the construction of The Woodlands Convention Center while the 2010 bond during the transition was used to fund the construction of Fire Station No. 6, the Emergency Training Center and assorted facilities and trail infrastructure for the township’s Parks and Recreation Department.
“The are two different bond issuance and refinancing, (first) the refinancing of what are called unlimited tax bonds that were originally issued in 2010. At the transition from the community associations to the Woodlands Township, there were some fire department and parks and recreation capital assets that needed to be funded,” Sharp. “We are refinancing those bonds.”
That bond is $20,490,000 of bonds with an original average interest rate in 2010 of 4.039 percent; which Sharp said is being refinanced at 1.717 percent interest rates tentatively through the year 2030.
“That is going to result in an annual debt service savings of $250,000 a year and the total saving over the remaining period for these bonds is $2.7 million,” Sharp said of the 2010 bond that was refinanced.
The second bond that was refinanced was one originally issued in 2001, and was later refinanced in 2010, Sharp added. That 2001 bond was used for the construction of The Woodlands Convention Center, which is attached to The Woodlands Waterway Marriott hotel complex.
“We also in 2010 had bonds issued — originally in 2001 — bonds were issued for the construction of The Woodlands Convention Center. In 2010, we had a refinancing opportunity and so we issued bonds in 2010 to refinance the bonds from 2001 and now we have another portion we can refinance again because we have an even better interest rate,” Sharp added. “These are sales tax and hotel occupancy tax bonds that we are refinancing.”
The 2001 bond total, Sharp said, was for $21,890,000 at an original interest rate of 3.881 percent. The new refinancing rate for that 2001 bond is tentatively 1.587 percent, but that may change Sharp added because of market changes that sometimes occur. the annual debt service savings is $220,000 and over $1.8 million in total for the life of the bond, which runs through about 2029.
Sharp said she and other township finance officials regular monitor the bond market and began this process in July, which was then presented to the township board during the early August budget hearings where it was OK’d, noting that between the legal issues and language of the documents, it is a complicated process.
“We monitor the bond market, specifically the municipal bond market and look for opportunities,” Sharp said. “It gets really complicated, so there are parameters we look for and we also engage financial advisers and they help us monitor that bond market. Closing is expected on Dec. 17 and that is when we’ll start saving the money, so effectively it will be in 2020. This is what I would consider very positive news, when you look at them combined, you’re looking at about $4.5 million in saving.”
Township board Chairman Gordy Bunch said he and other board members were happy with the refinancing and the resulting savings to the township.
“So, five million (in savings)…excellent,” Bunch said.
Township expects to receive online sales tax funds
Sharp said that the long-anticipated internet sales tax revenue that cities and other entities like The Woodlands Township was expecting to receive at the beginning of 2019 will apparently now be distributed beginning in December.
“As of Oct. 1, the state comptrollers office should have started collecting that on our behalf. It is not until the December sales tax report before we see what impact that is really having,” Sharp said. “We just have no prior data to go off, but what the state is estimating (in revenue) is about 1 percent. If you look at our annual sales tax revenue, which is $45 million, that would be about $450,000 (a year) based on that conservative 1 percent estimation. That will be paid monthly, but it is on a two-month (delay).”
The online sales tax, in most situations, is collected for all online purchases made and then is distributed based on where the purchaser lives to the proper entity or municipality that person resides in.