By Moses Leos III
With mounting public pressure to fix the roads, the Kyle City Council took its next and final step toward funding five voter-approved $36 million road bond projects.
By a 6-0 vote, Kyle council approved initiating $30.48 million in General Obligation (GO) Bonds to go toward construction costs for the projects. That move swings into motion Kyle’s process to repair all five roads by 2018.
“We just launched our roads,” Kyle Mayor Todd Webster said on the dais following the vote. “Here we go.”
The original plan was to stagger the issuance of the $30.48 million. According to city spokesperson Jerry Hendrix, the city originally opted to do one project per year and to fund projects when cash flow was needed.
In addition, the city’s plan was to stagger the impact on tax rates. The preliminary tax impact on the debt service for Kyle’s $36 million ranged from 5.23 to 20.75 cents per $100 taxable assessed valuation.
However, Webster said on the dais it was “financially prudent” to move forward with issuing all bonds at the same time.
“It actually fits what the public has been demanding from us, if you’re getting the same phone calls I’m getting,” Webster opined to council on the dais.
Kyle Director of Finance Perwez Moheet gave the council a trio of reasons for issuing the remaining GO Bonds.
But one of the primary reasons was to avoid possible increases in interest rates. Moheet said the Federal Reserve has hinted at interest rate increases since the fall.
In addition, the city seeks to secure funding for the projects prior to awarding construction contracts. Per estimates from City Engineer Leon Barba, Moheet said cash flow needs for the projects are where the city would “need them next year, or the year after that.”
Bunton Creek Road is slated to be the first of the five road bond projects for construction. The city estimates a start date of September 2015.
In addition, Moheet said the move would firm up debt service on the new bond. It would allow the city to set the interest and sinking component of property tax rates prior to the fiscal year 2016 budget process.
“Given all of those reasons, the timing is now and we’re going to do it,” Moheet said.
By issuing the remaining $30.48 million, the gross tax impact on the subsequent debt service is estimated to range from 10 to 14 cents per $100 of taxable assessed valuation.
Based on the city’s “strong financial position,” Moheet estimates the city can sell its bonds at a premium, thus offsetting any cost issuance. According to Moheet, the city’s “rule of thumb” is to use two percent of the bond for cost issuance.
He cited Standard and Poor’s upgrade of Kyle’s bond rating from A+ to AA- last March.
“If we need to sell bonds anyway, why don’t we do that now,” Moheet said.”
Tuesday’s decision marks the second issuance of GO Bonds Kyle has initiated for the road bond projects. Following approval of the road bonds in 2013, the city issued $5.520 million in GO Bonds for engineering, design and right-of-way acquisition.
Currently, the city has nearly completed preliminary engineering on four of the five main projects.