$174.665 Million General Obligation Pension Bonds, Taxable Series 2020

This transaction, the first with TMRS, represents significant potential savings to the City and fully funds their pension liability.

The Pension Plan – Financing Objective

• The City maintains a defined benefit pension plan with the Texas Municipal Retirement System (“TMRS”) for the benefits of its employees.
• With $31.9 billion in assets, TMRS is one of the largest pooled pension plans in Texas covering 180,000 employees in nearly 900 cities.
• As of 12/31/19, the plan was 86.8% funded and the City had an unfunded actuarily accrued pension liability of $173.3 million, based on plan assumptions including a 6.75% rate of return.
• The unfunded liability was being retired over an 18-year period through monthly payments.
• Although well funded, the City wanted to take advantage of low interest rates to fully fund its pension obligation using pension obligation bonds.
• Depending on future investment earnings and other factors, debt service on the pension bonds is expected to be substantially lower than expected amortization payments, representing significant savings for the City.

General Obligation Pension Bonds, Taxable Series 2020

• Priced August 27, 2020
• Negotiated sale with syndicate of 8 led by Citi
• Rated Aa1 / AAA / AAA by Moody’s, S&P and Fitch
• Repayment through I&S taxes vs M&O originally
• Serials bonds through 2038 to match current payoff plan
  • Coupons ranged from 0.206% to 2.146%
• All bonds sold at par with level debt service after 2021
• Make-whole call to maximize savings given low coupons
• Final true interest cost of 1.735%
• First pension obligation bonds completed with TMRS

Estrada Hinojosa has served as Financial Advisor to the City of Arlington, Texas since 2009. The firm has helped the City complete 77 transactions during this period for a total combined par value of about $2.35 billion.

Estrada Hinojosa is sole Financial Advisor to the City for the Rangers ballpark. An election was held on November 8, 2016 to allow current special taxes to support both the Rangers and Cowboys debt. Special taxes consist of 1/2% sales tax, 2.0% hotel occupancy tax (HOT), and 5.0% short term vehicle rental tax.

The City contributed $500 million to the project which was expected to cost approximately $1.0 billion.