Liberty Parke improvement bonds to hit market soon



The Liberty Hill City Council authorized the issuance of city-backed bonds totaling $4 million that will go toward public improvements in the Liberty Parke subdivision.

The approval Monday night signaled the nearing end of almost two years of negotiations between the city and the development, a single-family subdivision located off State Highway 29 near Classic Bank.

Among the improvements include water and wastewater services, a storm water pond, a lift station, an entry road, a trail system, and more.

The bonds, which will be offered and sold to a limited pool of investors, will be re-paid through an assessed fee levied on property owners in the subdivision.

Like car payments or a mortgage, the assessment will be tied to the property and payable in annual installments or all up-front. Interest on the assessment will be tied to the interest on the bonds, which will be determined in April after the bonds are sold. Preliminary estimations however, put one home as having an assessment totaling a little over $9,000.

Future homeowners that regularly fail to make payments on the assessment risk possible foreclosure, though the city’s bond counsel, Julia Houston, said that this would be a final resort.

The bonds will open for sale in early April, and their underwriter, Tripp Davenport, said he expects them to close by the end of the month. The Council will meet several times for additional legal steps then, such as authorizing the interest rates.

The improvements were split over two bonds because Phase 1 of the development’s construction is already nearing completion, which allowed a degree of confidence in the on-the-ground value assessment.

In contrast, Phases 2, 3 and 4 have not yet seen construction, and so the value assessment is more generalized.

Davenport said his firm, FMSbonds, has targeted a pool of 15-20 investors who meet the city’s stringent requirements for accredited investors or qualified institutional buyers.

The bond for Phase 1 homes, which is for $1.2 million, can only be bought in $25,000 denominations.

The bond for the other phases, called the “Master Improvement Area,” is valued at $2.8 million, and can only be bought in $100,000 denominations.

These are tax-exempt bonds.

Davenport said that he expects the market to be receptive to these bonds.

Liberty Hill is in a “great location,” and that feedback already from some interested investors has been “positive across the board,” he said.

The only negatives, he said, are the narrow market of possible investors, as per the city’s requirements, and that the bonds come with an amount of paperwork comparable to a $30 million bond.

The restriction on buyers also restricts their liquidity, since they cannot be transferred except to other narrowly qualified investors.

Davenport said that the bond market has lately been marked by volatility. This was true leading up to the presidential election in 2016, he said, and also after the election.

“We’re one tweet away from a rough day in the market,” he said.

Currently, no one yet lives in the subdivision, though at least 12 homes with “for sale” signs could be counted as of last week.