City Of Irving: City Saves $60.6 Million In Refinancing Debt Over 20 Years

Press release from the City of Irving:

February 2, 2022

Irving City Council recently took action to issue General Obligation Pension Bonds at a lower interest rate, resulting in more than $60.6 million in savings over the next 20 years. By taking advantage of historically low interest rates, the city capitalized on the opportunity to refinance existing pension obligation debt in a way that is like refinancing a home loan at a lower interest rate.

The city issued $86.22 million in General Obligation Pension Bonds on Nov. 15, 2021, to fund the Unfunded Actuarial Accrued Liability for two of the city’s pension plans for employees: Texas Municipal Retirement System (TMRS) and Supplemental Benefit Plan (SBP). The bonds have a 20-year life, which was the same duration as the prior service amortization period for SBP, but the amortization period for TMRS was shortened by four years, resulting in additional savings.

The true interest cost on the bonds was 2.65% over the 20-year life of the bonds, which is significantly lower than the 6.75% assumed average rate of return for both TMRS and SBP. The savings associated with the bonds totaled $44,213,904 — $28,878,195 for TMRS and $15,335,709 for SBP. Shortening the duration of the amortization period for TMRS saved an additional $16,424,414. The total projected savings to the city over the next 20 years is more than $60.6 million or 34.83%.

The city’s third pension plan, the Irving Firemen’s Relief and Retirement Fund (FRRF), is a separate fund for Irving’s Fire civil service employees. The city is currently working with the board of the FRRF to issue pension bonds for a significant portion of the FRRF’s actuarial liability. If interest rates remain favorable, the city anticipates issuing pension bonds for the FRRF in the next few months resulting in additional long-term savings.

Irving City Council recently took action to issue General Obligation Pension Bonds at a lower interest rate, resulting in more than $60.6 million in savings over the next 20 years. By taking advantage of historically low interest rates, the city capitalized on the opportunity to refinance existing pension obligation debt in a way that is like refinancing a home loan at a lower interest rate.

The city issued $86.22 million in General Obligation Pension Bonds on Nov. 15, 2021, to fund the Unfunded Actuarial Accrued Liability for two of the city’s pension plans for employees: Texas Municipal Retirement System (TMRS) and Supplemental Benefit Plan (SBP). The bonds have a 20-year life, which was the same duration as the prior service amortization period for SBP, but the amortization period for TMRS was shortened by four years, resulting in additional savings.

The true interest cost on the bonds was 2.65% over the 20-year life of the bonds, which is significantly lower than the 6.75% assumed average rate of return for both TMRS and SBP. The savings associated with the bonds totaled $44,213,904 — $28,878,195 for TMRS and $15,335,709 for SBP. Shortening the duration of the amortization period for TMRS saved an additional $16,424,414. The total projected savings to the city over the next 20 years is more than $60.6 million or 34.83%.

The city’s third pension plan, the Irving Firemen’s Relief and Retirement Fund (FRRF), is a separate fund for Irving’s Fire civil service employees. The city is currently working with the board of the FRRF to issue pension bonds for a significant portion of the FRRF’s actuarial liability. If interest rates remain favorable, the city anticipates issuing pension bonds for the FRRF in the next few months resulting in additional long-term savings.

This press release was produced by the City of Irving. The views expressed here are the author’s own.