KYLE — Kyle City Council approved a reimbursement resolution for the next 12 months that would allow the city to borrow money from itself through the general fund and pay it back at a later date through Certificate of Obligations (COs), as well as an addendum to the existing water agreement with the city of San Marcos.
“This reimbursement resolution before you this evening is in keeping with prior reimbursement resolutions that the city has adopted when it comes to plans for future financings. So, we have reimbursement resolutions currently in place relative to our 2020 general obligation bond authorization, as well as the 2022 street bond authorization. The resolution before you all tonight is for future projects unrelated to those for various projects in nearly $70 million — wastewater, parks [and] other streets not covered by the general obligation bond authorization that you currently have,” said Andrew Friedman, financial advisor to the city.
According to Friedman, by adopting this reimbursement resolution, the city will have the ability to spend money on projects prior to having the funds on hand, which will keep projects moving at a more efficient pace. These projects, which are included in the Capital Improvement Plan (CIP), are what gives the estimated dollar amount that can “conceivably be financed within the next year,” explained the financial advisor.
Among these items, council member Michael Tobias noted, are the largely discussed Kyle Sportsplex, a future library, but most importantly, an animal shelter.
“We are on the clock for an animal shelter, possibly an $8-10 million facility … What we’re saying is we’re going to be able to allow us to use some of those funds ahead of time, correct” asked Tobias.
Council member Robert Rizo agreed, stating that this will be a two-year process, so the city needs to begin the project as soon as possible.
“It’s just a financing mechanism to help make sure that we can take all those costs and reimburse them out of the bond proceeds when the bonds are issued. It helps us manage that we only issue the bonds when we need to,” said city manager Bryan Langley.
The city will essentially be borrowing money from the general fund to offset the need for multiple bond issuances from CO, allowing there to be less interest accrued. According to the Texas Comptroller, a CO is a flexible finance tool that allows local governments to fund major long-term projects without voter approval.
Despite having an initial idea in mind for what the money, if borrowed, could potentially be used for, Langley stated that each will still come in front of council at a later date for approval.
Additionally, Friedman stated that this will allow the city to appear more attractive to bond issuers.
Director of finance Perwez Moheet gave a breakdown of the nearly $70 million estimated for the COs:
• $37.1 million for water infrastructure improvements
• $11.1 million for wastewater treatment plan expansion related costs
• $3.8 million for the preliminary work for the Kensington Trail Park
• $4.7 million for preliminary work for intersection improvements throughout the city
• $2.6 million for the first year of the animal shelter (is expected to cost $10 million total)
• $9.9 million for Tax Improvement Reinvestment Zone #2 for roundabouts and illumination-related project improvement
“It makes a smarter decision to borrow within [the city], until such time that we can sell those bonds and reimburse ourselves,” said Moheet, noting that the 60-day limit for the city to decide whether it want to reimburse itself is already counting down, as the engineering department and planners have already begun spending money.
He also stated that it will have an impact on property tax rates and on utility rates.
Council approved the reimbursement resolution 6-0. Mayor Travis Mitchell was not in attendance. To listen to the discussion, visit bit.ly/3ZENCKI.
San Marcos water agreement
Previously in May, Kyle entered into an agreement with the city of San Marcos, in which the latter would provide roughly 500,000 gallons of water per day through 2026, with a maximum of 500 acre-feet of Edwards Aquifer Authority permitting capacity.
“The addendum allows Kyle the ability to return EAA permitting capacity to San Marcos for calendar years of ‘24 through ’26,” said director of water utilities Mike Murphy.
He continued by stating that staff is recommending offering San Marcos approximately half of the gallon per day capacity to meet its permit needs: “This is water that we have available. This is typically our lowest part of the year, as far as water consumption goes, towards the end of November through the end of February … So, we will be able to help out San Marcos. In addition, they’re going to pay us for that water.”
Because of a previous agreement, Kyle pays a minimum monthly amount equivalent to the usage of 223,186 gallons per day, at the billing rate of $3.41 per 1,000 gallons, totaling $22,832 per month, reads agenda documents. This is regardless of if this water is used. So, by offering the excess water, Kyle will be essentially saving money by receiving it back from San Marcos.
“It helps them out if they need that additional water and also takes that cost burden off of the city,” said Murphy. “This is just a good business arrangement between two neighboring cities.”
Under the agreement, water will be withdrawn at Kyle’s EAA Wells, while meeting San Marcos’ existing drought restrictions.
“Water is a big issue for our city, San Marcos and a bunch of other surrounding counties and cities, as well. So, I wanted to be able to have our residents to be able to understand what we’re doing is, basically, if it’s water that we don’t use and San Marcos needs, it’s kind of just having that agreement to be able to share the water,” concluded Tobias.
The item was approved 6-0. Kyle City Council will next meet on Dec. 12.
