SAN BENITO — The city will research a developer’s proposal to privately finance a $22 million project to repair streets and upgrade parts of the sewer system.
In a meeting last night, city commissioners requested City Attorney Ricardo Morado and City Manager Manuel De La Rosa to research McAllen-based developer Damian Guevara’s proposal to repair 81 streets and rebuild six sewer lift stations.
Guevara, who described himself as a banker and financier with Avery Resource Consultants, told commissioners that his attorney told him the city’s economic development corporation could use sales tax revenue to fund the $22 million project.
Morado questioned the use of sales tax revenue to fund street repairs and lift station upgrades.
“Our question is how we’re going to pay back the loan,” Commissioner Rene Villafranco told Guevara.
Guevara said sales tax revenue earmarked for EDC use could be used to pay back the loan within 25 years.
Recent interest rates ranged from 3.8 percent to 4.2 percent, he said.
The use of private financing could save the city about $1.5 million, Guevara said.
Guevara said it could cost the city $23.5 million to complete the project within four to five years.
But he could complete the project within three years at a cost of $22 million, he said.
Guevara said two construction firms and two engineering companies evaluated the streets and sewer system to determine the proposed project cost.
The companies’ experience in such projects would cut costs to $22 million while completing the work in three years, Guevara said.
“We’re getting bonded for the value of the project so if anything goes wrong our bonding company will take care of it,” he said.
Villafranco questioned whether the project would replace frayed, decades-old utility lines under streets.
“Our streets are in dire need but our infrastructure is holding us back and costs a lot of money,” Villafranco told Guevara.
Guevara said he was aware of the problem.
“That (project) comes with gas lines and utility lines we have to fix … under the streets,” he said.
Guevara said a city board would oversee the project.
“I have to ask the city to make the final decision on anything we do,” he said after the meeting.
Guevara, who said he works with nine financial institutions including banks, said he has been involved in public-private financing projects in Edinburg and Pharr.
The city is considering the option of private financing to fund city projects.
In an August town hall meeting, residents called poor street conditions the city’s biggest problem.
Meanwhile, city officials are considering borrowing about $10 million to upgrade six sewer lift stations to comply with part of a Texas Commission on Environmental Quality mandate stemming from nine sewage discharges from late 2009 to early 2010.
Last month, commissioners met with Harlingen developer Humberto Zamora, who proposed what he called a new program allowing the city to use its $10.4 million in annual sales tax revenue allocated to the state to fund projects without incurring debt.
Commissioners requested Morado and De La Rosa research that proposal.
Guevara’s presentation marked the second time commissioners have considered his proposals to privately finance projects.
In October, commissioners’ split vote led the city to kill Guevara’s plan to finance a proposed $11 million aquatics center.
Under that proposal, Guevara told commissioners he would finance a competition-sized swimming pool with two water slides.
As part of the plan, the city would put no money down while paying back the debt over an approximate 25-year period.
While Rodriguez and Commissioner Tony Gonzales supported the proposal, Mayor Ben Gomez and Commissioner Carol Lynn Sanchez voted against it. Commissioner Rene Villafranco was absent.
In response to Guevara’s proposal, Sanchez said the city was not “in the financial condition” to consider funding an aquatics center.
