SAN BENITO — The city’s Economic Development Corporation is helping to keep the city’s $9 million bond issue from driving up property taxes here.
Earlier this week, EDC officials agreed to make annual payments of $137,000 over a 25-year period to help pay off debt stemming from the city’s borrowing of $9 million through the sale of certificates of obligation aimed at funding a state-mandated sewer system upgrade.
During the meeting Tuesday, Don Gonzalez, the city’s financial advisor with Estrada Hinojosa Investment Bankers in San Antonio, told city commissioners the EDC’s payments will help keep the bond issue from driving up the city’s property tax rate which stands at 72-cent per $100 valuation.
“Since we’re assisting the city, there’s no need to increase taxes,” Rebeca Castillo, the EDC’s executive director, said Thursday.
But for months, City Manager Manuel De La Rosa has indicated the bond issue could lead to a water rate hike as early as next year.
After months of debate, EDC board members agreed to make the $137,000 payments after paying off debt tied to the construction of the city’s police station built about 20 years ago.
“We’re in full support of helping the city,” Castillo said. “The $137,000 has been freed up because we finished paying on the police station.”
Now, the EDC’s new $1.29 million budget includes a $2 million reserve along with a $365,378 surplus, Victoria Padron, the agency’s economic development specialist, stated.
“We have a good balanced budget so we can continue pursuing economic development efforts,” Castillo said.
The city’s sewer system upgrade will help the EDC draw business to town, she said.
“This will help in recruiting new development to the community and enhance the quality of life for San Benito residents,” she said.
Low interest rate
During Tuesday’s meeting, Gonzalez said he expects to lock a 2.87 percent interest rate on the bond sale he plans to close next month.
Gonzalez described current interest rates as “some of the very lowest interest rates that we’ve seen.”
As part of the finance plan aimed at saving about $764,000, the city is refinancing about $9.9 million in bonds dating back to 2011 and 2015, now carrying interest rates ranging from 2.42 percent to about 4 percent.
The project
As part of the overall $9 million project, $7 million will fund construction of six sewer lift stations to comply with a 2012 state order, $700,000 will fund the purchase of a fire truck and other equipment and $1 million will help fund other water and sewer projects. The bond package also includes the purchase of a $300,000 excavator.
Last year, commissioners borrowed $1.5 million through the sale of certificates of obligation to fund the planning and design phase of the project to rebuild the sewer lift stations.
Background
For about 10 years, the multimillion-dollar sewer system overhaul has loomed over one of Texas’ poorest cities.
As part of a 2012 agreement, the Texas Commission on Environmental Quality is requiring the city upgrade its sewer system by March 2023 or face severe fines and corrective action as a result of sewer spills about 10 years ago
In October 2012, the city entered into an agreement with TCEQ to participate in its Sanitary Sewer Overflow Initiative program following a series of sewage spills near the Arroyo Colorado totaling 49,000 gallons from November 2009 to January 2010.
As part of an agreement, the state waived penalties, ordering the city to upgrade its sewer system by March 2023 or face severe fines and corrective action.
