Round Rock Refinances Debt, Set To Reap $7.5 Million In Savings

ROUND ROCK, TX -- After a credit rating upgrade, the city has refinanced outstanding debt and now expects to save more than $7 million as a result.

Round Rock city officials said the city has refinanced more than $40 million in debt. As a result, nearly $7.5 million in savings are expected over the life of its bonds.

The savings -- about $400,000 a year in interest payments --come after a refinancing of the municipality's general obligation and utility debt. The refinancing was made possible after the ratings house Standard & Poors upgraded city debt, including a new rating of AA+ to the utility system and affirmation of the AA+ rating the general obligation debt.

The utility system debt is repaid through water and waste water revenues, while the general obligation debt is repaid through property taxes, city officials noted.

"The bulk of the savings are from the utility system refinance of $33.8 million in revenue bonds issued in 2009 to purchase a waste water treatment plant from the Lower Colorado River Authority," officials noted. "Round Rock and the cities of Austin and Cedar Park partnered on the purchase."

City officials said the rating upgrade rationale included:

• Robust, growing, and diversifying service area economy … and income levels that have remained very strong
• Good operational management policies and practices
• Good financial management policies and practices
• Extremely strong liquidity

The utility refinance savings total $6 million, about $300,000 a year, according to city officials. The new interest rate is 2.75 percent, compared to the original 5.0 percent, they added.

The remaining savings are coming from the refinancing of $7.4 million in certificates of obligation issued in 2007 for improvements to Old Settlers Park and participation in an indoor swim center at the YMCA, officials said.

The rating affirmation for the general obligation included:

• Very strong management, with “strong” financial policies and practices
• Very strong budgetary flexibility
• Very strong liquidity
• Strong budgetary performance, with operating surpluses in the general fund

City officials said the general obligation savings will be $1.5 million total, or about $89,000 a year. Meanwhile, the new interest rate is 2.14 percent, compared to the original 4.76 percent.