McKinney CityBaseLab — Refunding Analysis: GO Series 2025B

All Calculations Verified — Every Row Ties to the Penny

Refunded Bonds

$28.25M

GO Bonds, Series 2015 @ 5.000%

Refunding Par

$26.44M

Series 2025B @ 5.000% Coupon

OIP

$2.33M

8.83% of Par Value

Net CF Savings

$2.83M

7.59% of Refunded DS

PV Savings

$2.34M

8.28% of Refunded Par

Escrow Residual

$0.00

$0.93 cash + SLGS = exact defeasance

Transaction FlowSources: Causey p.5 (Exhibit A) · OS Schedule I, p.23

Refunding Bonds
$26,440,000

OI Premium

$2,334,892

City Contrib

$156,090

SLGS Purchase
$28,757,468

Defease Series 2015

$28,956,250

SLGS @ 4.350% for 58 days earns $198,781.07 interest · Escrow balance zeroes out exactly

Key ParametersSource: Series 2025B OS, pp. iv-v

Dated / Delivery Date:

June 18, 2025

Final Maturity:

August 15, 2035 (10 years)

Call Date / Price:

August 15, 2025 @ 100% (first optional redemption of refunded bonds)

Refunded Bonds:

GO Bonds, Series 2015 — $28,250,000 outstanding @ 5.000%

Refunding Type:

Current Refunding (57 days from delivery to call)

Escrow Security:

SLGS Certificate of Indebtedness @ 4.350%

SLGS Subscription:

Subscribed May 21, 2025

2025B Bond Purchaser:

Jefferies LLC (competitive sale @ ≈ 108.78% of par)

Financial Advisor:

Estrada Hinojosa

Bond Counsel:

Norton Rose Fulbright US LLP

Verification Agent:

Causey Public Finance, LLC (Denver, CO)

Paying Agent / Escrow:

BOKF, NA (Dallas, TX)

Use of Original 2015 Proceeds: The Series 2015 General Obligation Bonds were authorized by City voters and originally financed permanent public improvements, including streets and other capital projects. By refunding them at lower effective yields, the City reduces debt service on already-completed assets without extending maturity.

PV Savings %

8.28%

$2,340,188 / $28,250,000

Bond Yield (TIC)

3.3161%

PV(DS) = Par + OIP

All-in TIC

3.4346%

After UD + COI

Avg Life

5.95 yrs

Principal-weighted

Avg Coupon

5.000%

Par-weighted

Avg Yield (Reoffer)

3.223%

Par-weighted

PV Savings CalculationDiscount rate: bond yield 3.3161% (computed from OS p. v reoffer yields)

Component	Amount	Notes
PV of Old Series 2015 Debt Service	$31,271,170.66	21 cashflows discounted at bond yield
Less: PV of Series 2025B Debt Service	($28,774,892.45)	Equals (par + OIP) by construction — the issue price
Gross PV Difference	$2,496,278.21	Before issuer contribution
Less: City Contribution to Escrow	($156,090.26)	Cash-equivalent at delivery
Net PV Savings	$2,340,187.95	8.28% of $28,250,000 refunded par

Why 8.28% matters: Texas municipal best practice and many local refunding policies set a 3-5% PV savings threshold (as a percentage of refunded par) as the minimum for proceeding. McKinney's 8.28% exceeds that comfortably. The high savings ratio is driven by the inverted/flat yield curve at pricing — reoffer yields (2.98%-3.56%) are well below the 5.000% coupons on the refunded 2015 bonds.

Cash Flow Savings vs PV Savings (Reconciliation)

Cash Flow Basis	Amount
Old DS (Series 2015, no refunding)	$37,291,750.00
Less: New DS (Series 2025B)	($34,304,066.67)
Gross CF Savings	$2,987,683.33
Less: Issuer Contribution	($156,090.26)
Net CF Savings	$2,831,593.07

Present Value Basis @ 3.3161%	Amount
PV Old DS	$31,271,170.66
Less: PV New DS	($28,774,892.45)
Gross PV Savings	$2,496,278.21
Less: Issuer Contribution	($156,090.26)
Net PV Savings	$2,340,187.95

The two views answer different questions. Cash-flow savings ($2.83M) tells the City how much less cash leaves the General Fund over 10 years. PV savings ($2.34M) tells the analyst whether the deal is economically worthwhile after accounting for the time value of money. Both should be reported — the cash-flow number is more politically intuitive, the PV number is the financial-economics answer.

Escrow Arbitrage

Item	Amount / Rate
SLGS Par	$28,757,468.00
SLGS Coupon	4.350% (Actual/365)
Escrow Period	58 days (06/18/2025 → 08/15/2025)
Actual SLGS Earnings	$198,781.07
Earnings if Reinvested at Bond Yield (3.316%)	$151,536.74
Arbitrage Result	+$47,244.33 (positive)

Unusual but explainable: Most refundings show negative arbitrage — escrow yield below bond yield — because long-term bond yields exceed short-term escrow yields. Here the curve is inverted at pricing: SLGS at 4.350% earns more in 58 days than the 3.316% bond yield would. Because this is a tax-exempt bond, the City must monitor for arbitrage rebate compliance, though a 58-day escrow is short enough that practical rebate is minimal.

Escrow Cash Flow Verified — Balance Zeroes Exactly

Exhibit A-2: Escrowed Security DescriptionCausey Verification Report, p. 7

Type	Settlement	Maturity	Par Amount	Coupon	Price	Total Cost
SLGS C/I	06/18/2025	08/15/2025	$28,757,468.00	4.350%	100.000000%	$28,757,468.00

Exhibit A-1: Cash Receipt from Escrowed SecurityCausey Verification Report, p. 6

Date	Par	Rate	Days	Day Count	Interest	Total Receipt	Verified
08/15/2025	$28,757,468.00	4.350%	58	Actual/365	$198,781.07	$28,956,249.07	✓

Calculation: $28,757,468.00 × 4.350% × 58/365 = $198,781.07
Total Receipt: $28,757,468.00 + $198,781.07 = $28,956,249.07

Exhibit A: Escrow Account Cash FlowCausey Verification Report, p. 5

Date	Receipt from SLGS	Disbursement (Exhibit B)	Cash Balance	Verified
Beginning Balance			$0.93
08/15/2025	$28,956,249.07	$28,956,250.00	$0.00	✓
TOTAL	$28,956,249.07	$28,956,250.00	$0.00	✓

Defeasance Proof: $0.93 + $28,956,249.07 − $28,956,250.00 = $0.00 — Escrow zeroes out exactly.

21 Rows Verified — All Principal, Interest, and Totals Match

OS Schedule I: Refunded Bond Maturities (Series 2015)OS, p. 23

Maturity (Aug 15)	Coupon	Par Amount	Redemption Date	Call Price

What's being refunded: All ten remaining maturities (2026-2035) of Series 2015 are called at par on 08/15/2025. The 2025 maturity ($2,140,000) was paid at scheduled maturity and is not part of the refunding.

Exhibit B: Escrow Disbursement (Redemption on Call Date)Causey Verification Report, p. 8

Date	Rate	Principal Redeemed	Interest	Total	Verified
08/15/2025	5.000%	$28,250,000.00	$706,250.00	$28,956,250.00	✓

Interest: $28,250,000 × 5.000% / 2 = $706,250.00 (standard semi-annual coupon)

Exhibit B-1: Refunded Bond Debt Service (Assuming No Optional Redemption)Causey p. 9 · informational

Date	Rate	Principal	Interest	Total Payment	Outstanding	Match

Sources = Uses = $28,930,982.71 — Balanced

Exhibit C: Estimated Sources and Uses of FundsCausey Verification Report, p. 10

Sources of Funds
Par Value of Bonds	$26,440,000.00
Original Issue Premium	$2,334,892.45
Issuer Contribution	$156,090.26
Total Sources	$28,930,982.71

Uses of Funds
Beginning Escrow Cash Balance	$0.93
Cost of Escrowed Security	$28,757,468.00
Underwriter's Discount	$12,934.16
Issuance Costs	$160,579.62
Total Uses	$28,930,982.71

OIP Verification — each maturity's reoffer price tied to OS p. v

Maturity	Par	Coupon	Reoffer Price	Calc Premium	Published	Match

21 Rows Verified — Total DS = $34,304,066.67

Exhibit C-1: Refunding Bond Debt Service & ProductionCausey p. 11

First Coupon: Short first period — 57 days (30/360) from June 18 to Aug 15, 2025
First Interest: $26,440,000 × 5.000% × 57/360 = $209,316.67

Date	Rate	Principal	Interest	Total DS	Outstanding	Match

Gross CF Savings

$2,987,683

Old DS $37.29M − New DS $34.30M

Less Contribution

($156,090)

City cash to escrow

Net CF Savings

$2,831,593

7.59% of Refunded DS

Net PV Savings

$2,340,188

8.28% of Refunded Par

Par Reduction

$1,810,000

$28.25M → $26.44M (−6.41%)

Annual Debt Service Comparison: Refunded vs Refunding

Annual Savings Schedule

Period	Old DS (Series 2015)	New DS (Series 2025B)	Annual Savings	Cumulative Savings

Moody's Rating

Aaa

Stable outlook (underlying)

S&P Rating

AAA

Stable outlook (underlying)

Sale Type

Competitive

Bid awarded May 21, 2025

Award Price

≈ 108.78%

Of par to issuer

Authority for IssuanceSource: Series 2025B OS, pp. iv, 2

Texas Statutes:

Chapters 1207 and 1371, Texas Government Code, as amended

Local Authorization:

City of McKinney Home-Rule Charter

Bond Ordinance Adopted:

March 18, 2025 (City Council)

Pricing Officer Authority:

Delegated to designated Pricing Officer; sale terms set in 2025B Bond Pricing Certificate

Tax Status:

Tax-exempt (Norton Rose Fulbright opinion); interest excludable from gross income for federal tax purposes

AG Approval:

Subject to approving opinion of the Texas Attorney General

Tax Levy Authority:

Direct ad valorem tax (within statutory limits, $2.50/$100 max charter limit)

Redemption:

2025B Bonds NOT subject to optional redemption prior to maturity

Sale Day DetailSource: Series 2025B OS, p. 22

OS Date:

May 21, 2025

2025B Bond Purchaser:

Jefferies LLC

Sale Method:

Competitive bid (best bid awarded)

Sale Price:

≈ 108.78% of par

Reoffer Yields:

2.980% (2026 maturity) to 3.560% (2035 maturity)

CUSIP Base:

58178C

Concurrent Issues:

Issued under common OS with $35,650,000 GO Bonds Series 2025A and $27,985,000 W&S Tax/Revenue COs Series 2025

Professional Team

Issuer:

City of McKinney, Texas (Collin County)

Financial Advisor:

Estrada Hinojosa (operating under TRB Capital Markets, LLC)

Bond Counsel:

Norton Rose Fulbright US LLP, Dallas

Verification Agent:

Causey Public Finance, LLC, Denver, CO

Paying Agent / Registrar:

BOKF, NA, Dallas

Escrow Agent:

BOKF, NA, Dallas

Initial Bond Purchaser:

Jefferies LLC

Verification Methodology

Source Documents:

(1) Causey Public Finance, LLC — Verification Report (June 18, 2025); (2) City of McKinney Series 2025B Official Statement (May 21, 2025).

Exhibits Verified:

A (Escrow Cash Flow, p.5), A-1 (SLGS Receipt, p.6), A-2 (SLGS Description, p.7), B (Escrow Disbursement, p.8), B-1 (Refunded DS, p.9), C (Sources & Uses, p.10), C-1 (Refunding DS & Production, p.11). OS Schedule I (Refunded Bonds, p.23) and OS p.v (maturity schedule, yields).

Day Count (SLGS):

Actual/365 — 58 actual days from June 18 to August 15, 2025

Day Count (Coupons):

30/360 — 57 days for first period (12 + 30 + 15); standard 180 days for subsequent

First Coupon (2025B):

Short first period: $26,440,000 × 5.000% × 57/360 = $209,316.67

SLGS Interest:

$28,757,468.00 × 4.350% × 58/365 = $198,781.07

Escrow Proof:

$0.93 cash + $28,956,249.07 SLGS receipt = $28,956,250.00 disbursement → $0.00 residual

OIP Verification:

All 11 maturities: Par × (Reoffer Price − 100%) = Published Premium ± $0.00

PV Savings Method:

Bond yield (3.3161%) computed by IRR equating PV of all 21 DS payments to (par + OIP). Old/New DS streams discounted at this yield; difference less issuer contribution = Net PV Savings.

Verification Result:

ALL CALCULATIONS CONFIRMED — EVERY ROW TIES TO THE PENNY

Refunding Economics Summary

Refunding Type:

Current refunding (refunding bonds issued within 90 days of call date)

Mechanism:

Proceeds purchase SLGS placed in irrevocable escrow with BOKF, NA; escrow pays Aug 15 coupon + redeems at par on call date

Source of Savings:

$2.33M OIP effectively subsidizes the refunding. New bonds carry lower par ($26.44M vs $28.25M) and lower effective yield (3.32% TIC vs original 5.00% coupons), producing $2.99M gross DS savings and $2.34M PV savings (8.28% of refunded par).

Glossary

Advance Refunding: Refunding more than 90 days before the call date; tax-exempt advance refundings have been disallowed since the 2017 TCJA.
All-in TIC: True Interest Cost using net proceeds (par + premium less UD and COI). Reflects the issuer's true economic borrowing cost.
Arbitrage Rebate: IRS rule requiring tax-exempt issuers to remit excess earnings on bond proceeds invested above the bond yield.
Bond Yield: The IRR equating PV of debt service to the issue price (par + OIP). Used as the discount rate for PV savings and for federal arbitrage.
COI: Costs of Issuance — bond counsel, FA, paying/escrow agent, verification, rating agencies, OS printing, etc.
Current Refunding: Refunding within 90 days of the call date. Permitted for tax-exempt bonds.
Defeasance: Legally extinguishing a bond by funding an irrevocable escrow sufficient to pay all remaining DS. Once defeased, the bonds no longer count as outstanding for legal limit purposes.
Negative Arbitrage: When escrow earnings are below the bond yield. Shows up as a PV cost of refunding.
OIP: Original Issue Premium — amount paid above par at initial sale; reduces effective yield.
PV Savings: Cash flow savings discounted to today at the bond yield. Standard refunding decision metric.
SLGS: State and Local Government Series — non-marketable Treasuries sold by the U.S. Treasury for use in escrow defeasance accounts.
TIC: True Interest Cost — the discount rate equating PV of debt service to bond proceeds. The municipal-bond version of yield to maturity.
UD: Underwriter's Discount — the spread between price paid by the underwriter and reoffer price; the underwriter's compensation.

AI Disclosure: This verification analysis was prepared by Claude (AI Assistant) on behalf of Lewis McLain, CITYBASE.NET LLC, as part of the CityBaseLab examples library. All calculations were independently replicated from the published Causey Public Finance verification report and the Series 2025B Official Statement, and verified computationally. This analysis is for internal reference only and does not constitute an independent verification opinion.

City of McKinney, Texas

GO Refunding Bonds, Series 2025B — Verification Analysis