The Rockport City Council, at its regular meeting Tuesday, June 23, approved a resolution authorizing publication and posting of notice of intention to issue certificates of obligation (CO) to finance various public improvements.
City Manager Kevin Carruth noted Tuesday’s action is only intent to issue debt.
“We still have to go through the public hearing process, (and if the debt is issued) all individual projects will have to be approved (by council),” said Carruth.
City Financial Advisor Bob Henderson of RBC Capital Markets, meeting remotely, said, “This in no way commits the city to anything. I will be back in about 50 days (when you are making your final decision).”
The city has made significant inroads in paying down its current debt, which has resulted in a projected lowering of its Interest and Sinking (I&S, or debt service) tax rate in the 2020-21 fiscal year.
The projected decrease in the I&S portion of the tax rate will allow the city to float approximately $20 million in bonds this summer with minimal impact on the I&S rate.
Henderson told the council the tax rate management strategy they discussed during the strategic planning session in February is working out well, due to historically low interest rates and the rate at which the city has paid down its debt.
He noted all projections he used to determined what the city could now borrow, without significantly impacting the tax rate, are very conservative.
Earlier this year department heads were asked to come up with a wish list of long-term capital improvement projects, and the cost was significantly higher than the $17.2 million in bonds Henderson said the city could fund (using his conservative estimates) without an increase in the I&S rate.
The long-term wish list amounted to about $60 million.
That amount was whittled down to roughly $20 million for priority capital improvement projects, including a new city hall (see list at end of story).
At Tuesday’s meeting Henderson noted the city could fund the $20 million with a 1.2¢ increase in the I&S tax rate, coupled with an approximate one percent increase in water rates, based on his conservative estimates.
He noted those proposed increases could very well be less due to his conservative nature.
Carruth noted Fort Worth just issued bonds at an interest rate significantly less that what Henderson is estimating.
Based on a conservative growth rate of two percent in property values during the next five years, Henderson projected the city could fund another $30 million in five years without little to no impact to the tax rate.
“You (city) have very modest debt at a low interest rate that you’re paying off quickly,” said Henderson. “It’s exciting as a long-term planner to see you can handle your immediate needs.”
Mayor Pat Rios noted the city has been very prudent handling its money.
“With the price of money today it would be prudent to take advantage (of the historically low interest rates),” he said. “Regardless of what Harvey did to us, we did OK.”
Henderson concurred, adding, “There has never been a better time to issue debt.”
The proposed projects to be funded with a $20 million CO issuance are:
• City hall - $11,770,000
• Concho Street stormwater drainage - $2,300,000
• Key Allegro Bridge easements - $650,000
• City vehicles and equipment - $1,160,000
• RSC dispatch consoles (backup dispatch) - $750,000
• Austin Street rebuild and water main - $1,950,000
• Memorial Park parking lot and entrance - $300,000
• Memorial Park shade structure - $50,000
• Youth Gathering facility and parking - $600,000
• Pool re-plastering - $150,000
• Slide for large pool - $70,000
• Pool parking lot - $100,000
• Linden Street rehabilitation - $900,000
(Note: the total for these projects is $20,750,000. The CO issuance is projected at $20 million because $750,000 of the total amount would be paid via utility revenues.)