HARLINGEN — The Harlingen Economic Development Corp. is exploring the refinancing of its Bass Pro Shops bonds and could gain an extra $400,000 annually with a better deal.
The HEDC board heard a presentation this week from Anne Burger Entrekin, regional managing director at Hilltop Securities, on possible savings by refinancing what originally was a pair of sales tax revenue bonds totaling $31 million issued in 2010 to lure Bass Pro Shops to Harlingen.
A decade on, the city still owes $25 million on the 20-year bonds. But in the bond market, every 10 years the terms of a bond can be renegotiated if a city sees there is potentially a better interest rate and lower payments.
For the HEDC, which is the holder of the Bass Pro bonds, it could mean an annual savings of $400,000 for the remaining 10 years before the bonds’ call date.
“At this point the rates have actually gone down quite a bit to where what she was showing was if you look at the net present value of the savings of refinancing these bonds, or refunding these bonds over the next few years, we’re actually going to save more than $4 million,” Raudel Garza, executive director of the HEDC, said yesterday.
“Now that’s an estimate because it depends on what happens in the next few months before we lock in on rates,” he added. “The magnitude is about $4 million for the life of the loan, and that’s a net present value. That translates to a lower debt service, which opens up additional monies for us to use for more projects instead of tying it up in debt service. That’s all great for us.”
The bonds the HEDC took out in 2010 basically makes the city Bass Pro’s landlord, since it owns the property and building which house the outdoor retail giant.
The HEDC board voted this week to allow Entrekin to pursue a possible bond refinancing.
After the meeting, she said the bond issue was not related to Bass Pro’s performance at its Harlingen store, but instead was an opportunity for the city to take advantage of the current bond market.
The HEDC pays about $2.8 million a year on the Bass Pro bonds, and depending on which route is taken, could reduce that by $400,000. An unrelated bond taken out by the HEDC several years ago adds to the liabilities.
“The total annual debt is $3.2 million,” Garza said. “We have another outstanding loan taken out before my time, a $4 million loan that will be extinguished in two years.”
One benefit the city has if it decides to refinance the Bass Pro bonds is they’re rated A-plus-plus, which is as high as it gets.
Entrekin also floated the idea of the HEDC taking out a surety bond, or insurance, which for an additional cost would mean the city’s funds wouldn’t be tied up in a reserve account and they would be more liquid and easier to access if a big project comes by and the city wants to nurture it along.
“Basically she has to start lining up the bond counsel and asking for proposals from the underwriters and once the underwriters get back to us and tell us, ‘Ok, here’s the deal we can do for you.’ At that point the board has to decide whether it’s a go or no-go.
“At his point it’s still exploratory,” he added. “We’re excited about it. It’s always good to try to save money in the long term. So this is a good way of doing it.”