Medina County commissioners authorized the sale of $4 million in tax notes to First National Bank Texas during the commissioners court meeting last Thursday, June 4.
First National Bank Texas was the lowest of eight bids received for the notes with a 1.12 percent interest rate, which bumped up to 1.15 percent after figuring in the bank’s costs. The tax rate is 5.59 cents next year, then drops to 5 3/4 for several years before dropping further.
“What you all have as the county in finance, your audits, your performance on management, gives people a lot of comfort in buying your bonds,” said Mark McLiney of SAMCO Capital.
The county originally sought $3 million in bonds, but took out an extra million because of the low interest rate.
Other factors that played into the decision to issue an extra million dollars in bonds are the prospect of COVID-19 hampering growth, as well as Senate Bill 2, which requires that many taxing entities hold an election if they wish to raise 3.5 percent more property tax revenue than the previous year. That applies to the Maintenance and Operations (M&O) half of the tax rate, not the Interest and Sinking (I&S) half.
“I think bumping it up to this extra million at these levels of interest rates make a whole lot of sense, as long as we’re able to keep it in the six cent tax rate range,” McLiney said. “And I know I’m not going to be in control of the M&O rate, but it sure looks like even with that, and the 3.5 percent growth, you’re likely to have a tax rate lower next year than you do this year.”
McLiney suggested that instead of buying equipment when needed, the county issue a one-year tax note to get the purchase off of M&O half and into the I&S half.
“So you borrow in August, and you purchase and pay it off in February, it goes on the I&S tax rate if you’re struggling with the M&O 3.5 percent cap and your demands,” McLiney said. “So we have some built-in protections there, so that gives you flexibility next year.”
By Marly Davis
Staff Writer
