City poised for first step toward street, drain work
The city could launch its campaign against street flooding as early as next month, according to a briefing council members got from their financial advisor last week.
Mark McLiney, of Southwest Securities, told the council at its Jan. 18 meeting that bonds for street and drainage repair projects might cost the city less than anticipated.
"We have good news on what you can afford, compared with what we talked about during the (general obligation bond) election," he said.
In November, voters approved street and drainage projects totaling $2.7 million. That money is earmarked for projects that will improve East Cotter Avenue, Leslie Lane, South Station Street, La Rhonda Street, Alister Street, Avenue A and several storm water outfalls. Most of the projects are in the older sections of the city.
McLiney told the council that municipal bond interest rates for 20-year bonds should be figured for about 4.75 percent right now, though actual rates are slightly lower.
"I don't want to (talk about) 4.25 percent today, and you decide not to issue the bonds immediately, and we're then faced with a 4.5 percent rate," he said.
McLiney said if bonds were sold with a repayment period of 20 years, the annual payments would be about $210,000 and it would mean a property tax increase of 2.1 cents.
If the repayment period were shortened to 15 years, the payments would go up to $235,000 a year and the tax increase would be about 2.3 cents, he said.
"We can certainly get it done in 15 years and still get it below what you told the voters the tax increase would be, and I consider this the worst-case scenario," he said.
City officials estimated a property tax increase of 2.7 cents to pay for the bonds when they spoke to civic groups before the November bond election.
City Manager Michael Kovacs pointed out that a 15-year bond issue not only would cost less, it would actually save the city some money.
"The total interest saving between 20-year bonds and 15-year bonds would be roughly $700,000," he said.
"For a 15-year term and staying within our tax rate, that's a no-brainer," Mayor Claude Brown remarked.
Kovacs said he could bring the matter to the council during its February meeting and actually sell the bonds in March. Interest rates for TexPool, the cooperative municipal investment fund for Texas local governments, is between 5 and 5.25 percent, he said.
"Even with inflation, we're actually putting money back in" the investment account, he said.
McLiney noted that state law allows the city to pass a bond ordinance with one reading instead of the usual three. That, he said, is "because voters have already approved (the expenditure), so it's not as though we're trying to hide anything."
He also cautioned council members not to wait too long: "My feeling is that rates are starting to go higher, but next month they may start a trend back lower. A month from now, I'd estimate 4.10-4.25 percent would be the rate."
The council, however, showed no signs of reluctance. Councilman Keith McMullin moved to bring the bond ordinance before the council next month; Councilman Bubba Jensen seconded the motion; and it passed unanimously.
The February city council meeting is scheduled for Thursday, Feb. 15.