Deeper In Debt: San Marcos City Council To Spend $34.7 Million By Issuing Certificates Of Obligation

“The items that are a part of this agenda item were approved in fiscal year 2017 Capital Improvement Plan that was adopted with the FY17 budget, before the voters approved the public safety and library bonds. The voter approved bonds will be issued in FY18.”

During tonight’s city council meeting, the council will consider approving $34.7 million in Certificates of Obligation (CO’s) Bonds. 

At the time the San Marcos City Council approved this plan and numerous items, the city did not have the funding in place or in the General Fund.

Kristi Wyatt, Director of Communications & Intergovernmental Relations for the City of San Marcos said, “The items that are a part of this agenda item were approved in the fiscal year 2017 Capital Improvement Plan that was adopted with the FY17 budget before the voters approved the public safety and library bonds. The voter approved bonds will be issued in FY18.”

Here is a quick overview of the items;

(1) constructing, improving, extending and expanding City streets, bridges, sidewalks, bike lanes, pedestrian lanes, bus stops, parking, and related traffic improvements including acquiring any necessary rights-of-way and equipment

(2) constructing, improving and extending the City’s water and waste water system including acquiring equipment

(3) constructing, improving and extending the City’s Electric Utility System including acquiring equipment

(4) constructing, improving and designing existing municipal buildings to include the Activity Center, City Hall, Library, Public/Community Services Building and related equipment purchases

(5) constructing, designing, equipping and renovating City Parking Facilities

(6) constructing and improving the City’s Drainage and Flood Control Facilities

(7) constructing and improving the City’s airport

(8) constructing, designing, equipping and renovating Public Safety Facilities

WHAT ARE CERTIFICATE OF OBLIGATION BONDS?

According to the Texas Municipal League;

This “law also gives cities and counties the flexibility to issue debt through certificates of obligation on a shorter timeline.  This enables them to take advantage of favorable interest rates or an opportunity to acquire a property, to make emergency repairs after a disaster, or to address a critical public need without having to wait for the next uniform election date on the calendar.  Of all the debt issued by Texas cities in 2011, less than fourteen percent was through certificates of obligation.

With certificates of obligation, voters have the option to petition for an election on whether the certificates should be issued.  The bar was set relatively low for the petition requirements to call an election.  Only five percent of qualified voters need to sign a petition for an election on the issuance of certificates of obligation.  By comparison, at least seven percent of qualified voters have to sign a petition to call an election to roll back a property tax increase in larger cities.  In smaller cities, ten percent must petition for a rollback election.  And, it takes ten percent of qualified voters to petition for an election to reduce or increase a city’s sales tax rate or for an election to create a charter commission to write a new city charter.

It’s vital that Texas cities maintain this flexibility in financing public improvements because every city has different needs and resources.  The process for issuing debt, by law, has levels of transparency and accountability.

The decision on the kind of debt financing to use is a serious one for city officials involving many considerations.  And, like every decision city officials make, the voters will hold them accountable.”

BACKGROUND ON AGENDA ITEM 19

According to the supporting documents, “the City of San Marcos approved a Capital Improvements Plan during the FY2017 Budget process that called for the funding of approximately $48,300,000 in Capital Improvement Projects for the City of San Marcos.

These projects include street, infrastructure, drainage, electric, water/wastewater and airport improvements. Of those projects $2.7M will be cash funded with capital reserves, $6.9M will be issued at a later date, $285K has been canceled or rolling into another project, $5.0M moved to bond election projects, and $3.7M will be funded with HUD-DR funding.

Amounts deferred from prior years of $3.5M from FY16 and $431K from FY15 will also be included.  In addition, $300K for repairs to the Library roof and interior and estimated issuance costs of $400K are included for a total of $34.67M in bonds intended to be issued.

The first step in this process is a resolution directing publication of the notice of the intention to issue certificates of obligation. Two public notices are required to be posted in the local newspaper. The actual ordinance adopting the sale is currently scheduled for September 19, 2017. A complete timeline is attached.”

Here is a list of the supporting documents, which includes specific items and costs associated with those items.

• FY 2017-2026 10 Yr CIP 12-12-16 Amended for Fire Station 4
• San Marcos 2017 CO Timeline
• Final Bond Project Listing for issuance
• Intent Resolution 07.25.2017a

If you prefer to view the standard agenda, click HERE. 

San Marcos City Council Meeting Agenda — Tuesday, August 1, 2017 at 5:30 PM