Gonzales to use certificates of obligation for infrastructure repairs

Gonzales City Council voted unanimously July 25 to adopt an ordinance authorizing the issuance, sale and delivery of up to $6.2 million in aggregate principal amount of “City of Gonzales, Texas Combination Tax and Revenue Certificates of Obligation, Series 2019.” The city plans to use these funds for several infrastructure repairs. According to the Texas Comptroller of Public Accounts, certificates of obligation (COs) are a borrowing tool local government can use to fund public works without voter approval. COs are usually supported by property tax or other local revenues.  The comptroller notes local governments usually use COs to fund emergency projects, such as disaster relief or court-necessitated capital spending.

As detailed in the city’s capital improvement plan, the city seeks to tackle several infrastructure projects at once. Allocated to water-related projects is $2,787,941. That funding will be used to rehabilitate numerous existing ground storage tanks, replace and upgrade water meters and replace waterlines. The city has $1,134,000 budgeted to replace several wastewater lines. For street and drainage improvements, the city estimates those fixes will cost $2,194,800. In total, the city estimates the projects will cost $6,116,741. By using COs, instead of going budget-to-budget, the city hopes to expediate the repair process.

To secure payment for the COs, the city is authorized to levy an ad valorem tax and pledged “certain surplus revenues of the city’s waterworks and sewer system.” Mayor Connie Kacir also asked financial attorney Noel Valdez if surplus revenues from the city’s electric enterprise account could be used to repay the COs, and he said they could.

“This surplus revenue pledge with the waterworks and sewer system is attached to the certificates of obligation for purposes of compliance with state law, so that you can get all monies from the certificates of obligation deposited to the construction fund when we deliver the certificates of obligation,” Valdez said. “However, this doesn’t mandate that you use waterworks and sewer system revenues necessarily to the extent that you have surplus electric revenue funds that get into the general fund. Those can be used to subsidize the payment that would otherwise come from taxes.”

Rafael Martinez, RBC Capital Markets representative, told council the COs have an all-in 3.11 percent interest rate. Councilmember Dan Blakemore noted that due to the city maintaining its “A+ rating” it does not need to purchase bond insurance for the COs.

“That speaks volumes for the direction that we’re headed,” Blakemore said. “Hats off to every one of our citizens and thank y’all very much.”

The last section of the ordinance authorized “the execution of a paying agent/registrar agreement, a paying contract, an official statement and all other instruments and procedures related therto.”

Martinez said the bonds have been released to market and were “well received.” They will be open for trade Aug. 22, 2019.

Other news from the meeting:

• No public comments were given.
• After a state-required second reading, council approved two Gonzales Economic Development Corporation projects: Lynn Theater sign and marquee repair and a type b economic development project and performance agreement between GEDC and 515NSJ, LLC.