Council restarts discussion of certificates of obligation
The Elgin City Council discussed another try at issuing debt to fund projects, such as County Line Road upgrades and repairs to the police station, that ultimately didn’t make the list this spring.
This spring, the Elgin City Council worked on issuing certificates of obligation (COs) that would borrow money to fund water and wastewater infrastructure projects as well as building repairs, road improvements and park upgrades. However, after a group of citizens gathered signatures on a petition to bring the COs to a vote in an election, the council ultimately voted to pare down the money borrowed to just fund the water and wastewater projects.
The discussion began with a presentation about the proposed new round of COs and the surrounding issues from city manager Thomas Mattis. He said the change in the original COs has impacted city operations and employee morale; for example, the police station would have been remodeled or expanded under the first round of COs as originally proposed. Since then, that facility has suffered a mold issue and required emergency repairs in order to keep it functioning.
“We've left the staff wondering if we're committed to meeting the demands of a growing community,” Mattis said.
The projects in the original COs could have been started immediately, but have now been delayed by at least six months, and the city also lost the opportunity to purchase a piece of property next door to city hall to expand city offices.
Had the COs gone forward as proposed, the tax rate would have stayed the same; however, now the tax rate must decrease, then would increase in the future. There will also be the increased costs of issuing a second set of COs, and the interest rate has increased since the first round of COs were approved.
Finally, a delay in starting the County Line Project puts the $5 million in private funding from developers at risk. If a project is put on a ballot and voted down, the city can’t borrow money to fund that project for three years. The city’s commitment to the developers is to begin construction no later than December 2024 or forfeit the funds.
Most of the projects proposed in this new round of COs are the same projects removed from the CO series earlier in the year: phase one of the County Line Road reconstruction, downtown sidewalk revitalization, Thomas Park improvements, Veterans Park expansion, police department expansion and renovation, and the demolition of the building next to the police station. One new addition proposed in this round of COs is about $3 million for the Elgin Economic Development Corporation (EDC) to fund their commitments, including infrastructure improvements required for the business park. This portion of the CO debt would be paid from the EDC’s portion of the sales tax.
Many of these projects, if funded through another round of COs, could see significant progress within the next year; for example, if the proposed COs are approved by the council this fall, the first phase of the County Line Road project can be bid out by January and completed by the beginning of 2023.
The recommended action for the council at the September 21 meeting was to start the process by passing a resolution stating the city’s intent to issue COs in the amount not to exceed $12.5 million. The council will have opportunities to consider changes to a potential CO series before the final action in 60 days.
“There is no advantage to waiting until next May,” Mattis said. “We’ll be further and further behind. These projects need to be done, and we're prepared to move forward quickly on them.”
A total of seven people spoke in public comment about the COs, with five in support of them and two against. Many of those speaking in favor of the COs, including Parks & Recreation Advisory Board member Carlos Gandia, expressed support for using CO funds to build and improve parks. Representing Elgin ISD, Superintendent Jodi Duron spoke to the council in support of upgrading County Line Road, which borders two school campuses. Speaking against the COs, Stephanie Lippke and Grant Hennig asked that the funding for the projects be put to a vote with a bond.
After public comment, Elgin Mayor Ron Ramirez kicked off the discussion amongst the council. He said that he is fully in favor of the police station, County Line Road and EDC projects, and is in favor of the parks as well and feels that they should be included as well.
“Our police officers and our staff in the police department are having to work in an unsafe building,” Ramirez said. “On County Line Road, we have two new subdivisions that six months ago we had no idea were coming, that’s 2000 more houses that are going to start building on County Line Road. We can't wait.”
Council member Matthew Callahan asked why this hasn’t been prepared to be put to a vote earlier. Ramirez said his original thought was to put some of these projects up for a vote in May, but he did not anticipate the needs of these projects to develop as quickly as they have.
Mayor Pro-Tem Sue Brashar said issuing more COs won’t improve the city’s bond rating but won’t make it any worse, and the majority of the feedback she has received has been in favor of these projects.
Council member Jessica Bega said that the council needs to make a decision and be confident in its decision, and agrees that the city cannot wait on these projects.
Council member Thomas Ibis pointed out that the library building where the meeting took place was brought to a vote, and said that these proposed projects also need to go to the voters.
Council member Forest Dennis said that he thinks the time is right for these projects, and this proposal is in line with the most recent law from the Texas Legislature regarding COs.
Councilmembers Susie Arreaga, Skyler Maldonado and Arthur Gibson III agreed that the city needs to move forward with these projects. Ramirez agreed, saying that the council is elected to take care of the needs of the city.
The motion to approve the notice of intent to issue the COs passed 7-2, with Ibis and Callahan voting no.
The entire video of the September 21 meeting is available on the City of Elgin - Texas YouTube channel. The discussion of the certificates of obligation begins at 51:00.