WESLACO — Officials here recently affirmed their commitment to investing in the City on the Grow by approving a $12.5 million debt issuance that will go toward funding several quality-of-life projects.
The debt, issued via certificates of obligation, will go toward funding improvements at several of Weslaco’s public parks, the Valley Nature Center, as well as the public works and public safety departments, officials said.
“These certificates of obligation are really gonna bring good quality of life… And we want to make sure that we’re keeping up with the facilities around the city,” Weslaco City Manager Martin Garza Jr. said Thursday.
Though the funding allocations are not yet set in stone, Garza estimated that approximately $6.1 million would go toward improvements at Isaac Rodriguez and Mayor Pablo Peña parks, as well as the new municipal pool.
Some $3.5 million of the COs will likely go toward funding the expansion of Mile 10 North Road in collaboration with Hidalgo County Precinct 1, and $1.7 million toward ongoing development of Weslaco’s public safety complex along Business 83, where the city is building a new police and fire station.
The Valley Nature Center will also benefit from $500,000 to repair its roof, and any remaining funds will likely be used in the construction of an entirely new public library, Garza said.
And the city will be able to fund these projects at lower-than-expected costs amidst what has been an extremely volatile financial market that saw the U.S. Federal Reserve raise interest rates seven times in 2022 alone.
“We’re borrowing $12.5 (million), but in reality, we’re paying back $11.8 million,” Garza said.
Weslaco’s financial advisers, San Antonio-based Hilltop Securities, explained that this is because the city was able to secure a lower-than-expected interest rate on the debt.
“This, I think, is the most important news — when I was here before you, we projected a 5.09% interest rate, and the rate before your consideration this evening is 3.73(%),” Anne Burger Entrekin, managing director for Hilltop Securities, explained during a recent Weslaco City Commission meeting.
Entrekin was speaking of a presentation she had given the commission last November in which she had outlined how much Weslaco would likely be able to borrow, and how it would impact the city’s bottom line.
Since that meeting — and since the commission gave her the initial greenlight to pursue the funding — interest rates have continued to fluctuate, but have also fallen somewhat.
Weslaco was also able to sell the bonds at a premium — or, at a greater market value than face value — which will give the city additional money that it can put toward the projects.
“You are able to get the entire $12,500,000 because they had a premium of $865,000,” Entrekin said to the commission.
Furthermore, Entrekin explained that Weslaco will be able to pay off the debt in just nine years, rather than the typical term of 10 years, which will result in further interest savings.
“We had projected the total debt service to be ($20.2 million). In reality, the bid for your consideration is ($17.6 million). That is $2,585,000 less in interest over the life of this bond issue,” she said.
We’re in good standing to be able to make all these improvements, being able to borrow this money to do these improvements (and) at the same time, leaving capacity for any type of emergency.
That confluence of favorable variables will even allow Weslaco to lower its debt service tax rate by one penny next fiscal year, Entrekin said.
But the debt issuance hasn’t come without concern from local citizens who worry about the city taking on additional debt and also that the money won’t be used to fund drainage improvements.
Garza explained that Weslaco has the flexibility to handle the debt because it has made significant progress in retiring — or paying off — older loans.
“This year, in 2023, we’re removing two debts — a series 2012 and series 2013 (certificates of obligation),” Garza said.
The retirement of those debts, as well as refinancing some existing COs at lower interest rates, has expanded Weslaco’s borrowing capacity to some $18 million, Garza said.
Garza expects the city’s borrowing capacity to gain additional flexibility in both the general fund and the water and sewer fund thanks to the retirement of additional debt over the coming years.
“We’re gonna have borrowing capacity in 2025 and we’re gonna have borrowing capacity in 2027,” he said.
But officials are taking care to not borrow at the limits of that capacity, just in case.
“We’re in good standing to be able to make all these improvements, being able to borrow this money to do these improvements (and) at the same time, leaving capacity for any type of emergency,” Garza said.
