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EDINBURG — Officials here are considering taking on millions in new debt in order to fund the repair of water, wastewater, landfill and other infrastructure projects.
The Edinburg City Council is mulling the issuance of some $18 million in certificates of obligation in mid-September, just a couple of weeks before the statutory deadline for the city to approve its fiscal year 2025 budget and set the property tax rate.
To that end, the council held a discussion about the potential debt issuance during a meeting Tuesday night.
There, they learned from the city’s financial advisers, Estrada Hinojosa Investment Bankers, about the timeline required to issue the debt and what it would be used for.
“Essentially, what you’re doing today is giving authorization of up to ($18 million). You can go down … or you can completely scrap it and not do anything at all,” explained Roberto “Bobby” Villarreal, executive vice president at Estrada Hinojosa.
The city’s legal advisers explained the process further, saying that Tuesday’s discussions and decision making didn’t obligate Edinburg to issue all, or even some, of the debt, but that time was of the essence if they wanted that option to remain available in the future.
“This is a two-part process,” attorney Arnold Cantu, with Cantu Harden, said.
“The first, and probably the most important point, is that you are not committing to issue debt at this meeting. This is one part of a two-part process in which you give notice, with financial information, the principal amount (of debt) that you intend to issue,” Cantu further said.
According to a draft copy of the intent to issue debt that was included as part of Tuesday’s meeting agenda packet, the money would be used, in part, to fund Edinburg’s water and sewer infrastructure.
That includes renovating and expanding the “municipal and wastewater utility system,” the packet states.
Much of that system is in need of a massive overhaul. City staffers have previously explained that Edinburg’s water and sewer system needs nearly 100 distinct improvement projects with an estimated price tag north of $260 million.
Not only does the city’s existing and aging infrastructure need long-put-off maintenance, but Edinburg also needs a new wastewater treatment plant, a new water tower, and other new infrastructure.
Until now, Edinburg has been unable to fund neither deferred maintenance nor growth in the utility system because its utility rates had remained stagnant for two decades, which led to the utility fund becoming insolvent.
But in April, Edinburg began implementing a series of progressive utility rate increases aimed at bringing the utility system’s finances back up to par and bettering the city’s debt capacity.
Already, the new rates are generating an estimated $350,000 in additional revenue each month, staffers explained during a budget workshop in June.
Should the council approve the $18 million debt issuance, another portion of it would be used to expand the city’s landfill, which is a major revenue-generating enterprise for Edinburg, as the city maintains trash disposal contracts with numerous neighboring cities.
The city landfill is currently in the preliminary stages of setting up to handle the thousands of tons of debris that will be generated by the eventual demolition of the existing Hidalgo County Courthouse.
During the June budget workshop, city staff informed the council that the land will need to build an entirely new “cell” to accommodate the demolition materials that are expected to come from the eventual shuttering of the 70-year-old building.
The remainder of the borrowed funds will go toward the following:
>> “(C)onstructing street improvements (including utilities repair, replacement, and relocation)
>> curbs, gutters and sidewalk improvements, “including drainage and traffic safety signalization and signage…”
>> the purchase of materials, supplies, equipment and rights-of-way purchases related to the projects
>> fees for professional services, design, construction, project management and financing.
According to the draft “notice of intent,” once interest is factored in, the city will ultimately wind up paying more than $28.3 million on the $18 million debt issuance over the 20-year life of the loan.
It expects to repay the debt via a combination of ad valorem — or property — taxes, and revenues generated “from the operation of the City’s municipal water and wastewater utility system,” the draft notice reads.
After some more discussion Tuesday, the city council unanimously voted to issue the notice of intent.
