The Belton City Council passed a resolution Tuesday showing it intends to fund up to $7 million in utility projects with Combination Tax and Limited Revenue Certificates of Obligation.
The bond funding would pay for four projects, including three that are listed in the City’s Capital Improvement Program. The projects with estimated costs are:
- North Belton Elevated Storage Tank ($3.4 million)
- McFarland Estates Water/Sewer Improvements ($1 million)
- 6th Avenue Waterline Replacement ($850,000)
- Loop 121 pump replacements ($800,000)
With $4.4 million in reserves available, the City initially planned to pay for the water tower with cash, but decided instead to enter the bond market for funding to take advantage of low interest rates.
The rationale for this decision is tied to a $13.7 million bond issuance planned for 2023 to fund several significant capital projects, including Phase 2 improvements at the Temple-Belton Wastewater Treatment Plant.
The plan is to save the $4.4 million and apply it to upgrades at the treatment plant or other projects that would be part of that bond, which would drop the bond funding needed in 2023 to under $10 million. The benefit to that is it makes the bonds “bank-qualified,” which typically brings lower interest rates.
Finance Director Michael Rodgers said he projects a $500,000 savings in interest payments over the life of the debts just by saving the cash and applying it in 2023.
Mayor Pro Tem David K. Leigh compared the council’s decision to a practice by some airlines to save money by purchasing large amounts of fuel before anticipated increases in price. The term used to describe that practice is hedging.
“We’re hedging against inflation,” Leigh said.
While the council has shown its intent to issue certificates, the transaction and approval by council is not scheduled to take place until Jan. 11, 2022. Prior to that time the City will accept public comments about its intent to issue certificates. Three weekly public notices will be posted Nov. 15-29, and an in-person public hearing is scheduled for Dec. 14.