Page 121 - CityofMansfieldFY24Budget

Debt Structure

Historically, the City of Mansfield’s debt structures have been designed to coincide with the fiscal
policies of the City of Mansfield, Texas, essentially allowing growth to pay for growth by properly setting
the maturities of the debt to equal or less than the usefulness of the improvement or asset.

Typical debt structure of a bond issuance:

 Term or serial bonds structured for annual payments
 Traditional call feature that does not influence the price of the bonds
 Average bond life of 10.5 years to 12.0 years
 Level payments for 20 years
 Pricing structured to allow for premiums and discounts
 First year payment to begin in second year of construction
 Bond insurance
 Surety bond if warranted

The City of Mansfield has sought non-traditional avenues of capital improvement financing; however, the
City is considered a “small issuer” under the law. It has been more economical for the City to maintain
this type of debt structure for its bond sales. This does not preclude the City from considering different
structures or structuring its issuance differently from its typical debt structure. The purpose of the
structure is to provide the City with the lowest possible costs under market conditions at the time of
issuance.

Methods of Sale

Competitive Sale: The City shall seek to issue its debt obligations in a competitive bidding environment.
Bids shall be awarded on a True Interest Cost, providing the bidders meet other bidding requirements. In
some instances, the City may award the sale to the lowest Net Interest Cost bidder depending on the
economic substance of the transaction. If the competitive bidding process is not conducive to soliciting
the lowest cost of financing a bond issuance, the City may choose to negotiate the sale.

Negotiated Sale: The City shall seek to weigh the selection of underwriter before negotiating a bond sale.
The selection of the underwriter shall encourage the best economic environment in which the City will
benefit from selling its bonds. Typically, negotiated sales will occur when the market volatility is
unpredictable. In some cases this may mean investors are not willing to commit capital in uncertain
economic environments, or the size of the issue may not attract the bids for a successful sale. Moreover,
the primary purpose of the negotiated sale is to solicit the interest rate environment for the City to sell
bonds.

Private Placement: The City will seek to privately place its bonds with a select group of investors when
the issuance warrants the sophistication of the buyer. The City will ensure that the placement fee is less
than a typical underwriter’s fee in a negotiated offering of a comparable type sale in a similar sale
environment.

Refunding of Debt

The City of Mansfield, Texas shall monitor the municipal bond market for opportunities to refund
outstanding debt to save the City from future interest costs. As a general rule, the savings shall be at least
3% greater than the cost of carrying the existing debt inclusive of issuance costs and any cash

120