City of Eagle Pass increases amount of Certificates of Obligation to $10 Million
By: Jose G. Landa, Copyright 2015, Eagle Pass Business Journal, Inc.
The Eagle Pass City Council held a special meeting on Tuesday, April 21, 2015 and approved to authorize the City to publish a notification of intent to seek Certificates of Obligation of up to $10 Million instead of the previously discussed $8 Million for certain city improvements, projects, and equipment.
At a previous April , 2015 City Council Workshop, the Eagle Pass City Council had discussed several city projects which would require funding during fiscal year 2016 and the need to issue tax revenue-based Certificates of Obligation of approximately $8 Million to fund these city projects.
Eagle Pass financial advisor David Gonzalez of Estrada & Hinojosa and Bond Counsel Juan “Johnny” Aguilera made a presentation to City Council regarding the financial and legal analysis of an $8 Million Certificates of Obligation issuance by the City of Eagle Pass.
“We were asked to go out and do an analysis based on the projects that we had discussed. We went and ran the analysis and that is what we have here being presented today,” said Gonzalez. Gonzalez advised City Council that the current interest rates in the market are very low and favorable for governmental entities to borrow monies to fund improvements.
Gonzalez noted the four city projects targeted to be funded with these $8 Million, including street improvements, park improvements, public safety headquarters, and public library improvements. Gonzalez opined that these four projects would require $7.8 Million to fund them and with issuance costs it would come out to $8 Million. Gonzalez cautioned that these are preliminary figures and the final costs would not be known until the City went to the financial market and finalized everything.
Gonzalez presented the tax rate impact analysis study for the City of Eagle Pass under pre- 2015. “These are the current INS tax rate of the City of Eagle Pass in which you are looking at $0.1566 cents. You are looking at a $.2 cent increase per every $100 valuation whether the City wants to move forward with Certificates of Obligation regardless the INS is going to increase 2 pennies because the City has been using enterprise monies to off-set the INS increase,” said Gonzalez.
Under post-2015 tax analysis, Gonzalez stated that under the proposed $8 Million certificates of obligation the city taxpayer would be seeing an INS tax increase of $0.64 cents per $100 valuation, that is, 6.4 cents for every $100 of valuation.
“The certificates of obligation are roughly $0.45 cents along with the increase that is coming next year which is about $0.2 cents so you are looking at about $0.65 cents for a total of $8 Million issuance of certificates of obligation,” said Gonzalez. In other words, if the City goes out for $8 Million of Certificates of Obligations, Eagle Pass taxpayers would see a tax increase of 6.5 cents for every $100 valuation of their property in order to pay for these $8 Million Certificates of Obligations. This does not include any increased taxes if the Maverick County Appraisal District decides to increase one’s property appraisal value for 2016.
Gonzalez also presented City Council a timeline of events to take place for the issuance of the $8 Million certificates of obligation.
Gonzalez stated that everything should be finalized and set to sell by the month of June 2015 and that closing on the loan would take place in July 2015 in which the City would then be wired the funds from the sale of the $8 Million certificates of obligation.
“The Council is not approving final terms, final interest rates, you’re just allowing us and bond counsel to move forward to get started with the process,” said Gonzalez.
Gonzalez state that the final set process with all the details would be presented on June 2, 2015.
City Council discussed the city street improvement project funding from these $8 Million is for a sixth year of a seven year plan. The question arose if the City was better off going out for additional funding for its seventh year now while interest rates are low rather than later when interest rates are unknown.
Mayor Ramsey English Cantu asked Council members if they were interested in being more aggressive and seek up to $10 Million instead of the $8 Million to take advantage of the low interest rates available today. A lively discussion was held between City Council, City Manager Gloria Barrientos, Gonzalez and Aguilera on the wisdom and advantages of asking for up to $10 Million instead of $8 Million and which City improvement projects would be covered with these monies.
City Manager Barrientos raised the issue if public library equipment and City capital equipment needs could be purchased with the $10 Million bonds. Gonzalez and Aguilera assured City Council that library equipment and City capital equipment could be funded with part of these $10 Million in bonds. Bond Counsel Johnny Aguilera stated that “as long as the City buys a typewriter” for the public library, it would be considered library equipment. Mayor Cantu told Aguilera that maybe he should say a computer instead of a typewriter while Councilman Rudy Villalpando told Aguilera that he would never have used the word “typewriter.”
City Council discussed the advantages of the availability of low interest rates now and taking advantage to fund other important city projects such as additional capital street improvements and equipment for the library and city departments.
Gonzalez stated that at present time the interest rates are very low and it would be hard to predict where they would be a year from now.
Gonzalez emphasized that many governmental entities are moving on getting needed projects done now to be able to lock in the lower interest rates rather than risking it and going out for funds later without knowing what those interest rates will be next year.
Mayor Pro-Tem Luis E. Sifuentes stated that the City should specify which additional projects would be funded with the additional $2 Million instead of being general and vague about it.
City Council asked Public Works Director Hector Chavez the total funding amount needed to cover street improvements for the seventh year and whether Public Works could handle the extra work next year. City Council also discussed the need for library equipment and City capital equipment needs be included. These discussions resulted in three amendments to the original motion to approve the authorization of the City to publish its notice of intent to seek up to $10 Million in Certificates of Obligation.
After further discussion into accelerating the process for street repair , council concurred to push forward and possibly seeking certificates of obligation not to exceed $10,000,00 adding $2,000,000 to the originally proposed package.
“It comes down to, do we go for the $10,000,000 now at a lower interest rate or do we go for $8,000,000 and then later go for another $2,000,000 at a higher interest,” said Sifuentes.
Gonzalez and Aguilera advised City Council that the addition of the seventh year street improvements, library equipment, and city capital equipment could all be added to the original four city projects designated at the City Workshop.
City Council concurred and unanimously voted in favor of allowing their financial advisor and bond counsel to setting the language and plan in place for the issuance of certificates of obligation not to exceed $10 Million and the publication of the City’s notice of intent and proceed with plan covering the construction and improvements of streets curbs and sidewalks together with the utility relocation, drainage improvements, land acquisitions and expenses incidental to such construction and or improvements to such streets, drainage , curbs, and gutter improvements, improvement of equipment and city parks, purchase of land for parks purposes, construction, improvement and renovations of municipal buildings to be used as the public safety headquarters, purchase of equipment for public safety headquarters, public library and the payment of professional services related to the construction and financing of the aforementioned projects.
