SAN BENITO — The cash is on its way.
Earlier this week, city commissioners voted to borrow $1.5 million through the sale of certificates of obligation to fund the planning and design phase of an $8.2 million state-mandated sewer system upgrade.
“Right now, it’ll get the planning and design out of the way,” City Manager Manuel De La Rosa told commissioners during Tuesday’s meeting.
By next year, city officials plan to borrow an additional $6.7 million to fund the project’s construction phase.
As part of an agreement, the Texas Commission on Environmental Quality is giving the city a March 2023 deadline to upgrade its sewer system or face severe fines and penalties stemming from a series of sewage spills in 2009 and 2010.
“We’re running out of time and we’ve got a deadline to meet,” De La Rosa told commissioners during the meeting.
After tense debate, commissioners agreed to set aside $65,000 from the city’s Economic Development Corporation and $17,230 in federal Community Development Block Grant money to help fund the $1.5 million planning and design phase.
That money will help officials avoid raising the city’s 72-cent property tax rate by about 2 cents and boosting one of the Valley’s highest water rates by about 3 cents.
As a result, the bond sale will not increase the tax rate or water rate, De La Rosa said.
Originally, commissioners planned to use about $40,000 in CDBG money to lower the amount of money they wanted to borrow.
However, representatives of local nonprofit agencies called on commissioners to use that money to fund their charities.
In response, commissioners earmarked about $32,000 to be divided among four local charities.
Meanwhile, De La Rosa said he would make about $22,000 in budget cuts to offset the amount of CDBG money going to the nonprofits.
“We’re not increasing taxes — we will trim,” he said. “We’re going to trim the budget somehow. We’re restructuring departments city-wide. There’s going to be some savings.”
Don Gonzalez, the city’s financial advisor, said he expected to close the bond sale in late August, estimating the interest rate at about 3.25 percent through the 10-year term.
For more than a year, commissioners have battled over the proposed project to upgrade the aging sewer system.
Last year, the commission’s majority appeared to support the finance plan — until it came time to vote.
Then, suddenly, commissioners voted down a proposed $12.5 bond issue that included street and water line projects, warning it would force a 6-cent property tax increase.
Instead, commissioners opted to search for grants to fund the project— but neither state nor federal agencies were handing out money.
How they voted
On Tuesday, Mayor Ben Gomez and Commissioners Rene Villafranco and Carol Lynn Sanchez voted to fund the proposed project’s $1.5 million planning and design phase.
Meanwhile, Commissioner Rick Guerra opposed the plan, requesting commissioners consider a 1.8-percent loan from the Texas Water Development Board.
However, Gonzalez said the water board would take longer to consider the request.
“It’s a little bit longer of a process,” Gonzalez, with the financial firm of Estrada Hinojosa, said. “It’s more intensive as far as documentation on the engineering side. It has to be done very quickly given our time frame.”
Commissioner Tony Gonzales, who was absent, has said he opposed the bond sale.
Earlier this week, he suggested De La Rosa search for additional money such as sales tax revenue to help fund the sewer overhaul.
How we got here
For nearly 10 years, the multimillion-dollar sewer system overhaul has loomed over one of Texas’ the poorest cities.
In October 2012, the city entered into an agreement with TCEQ to participate in its Sanitary Sewer Overflow Initiative program following a series of sewage spills near the Arroyo Colorado totaling 49,000 gallons from November 2009 to January 2010.
As part of an agreement, the state waived penalties, ordering the city to upgrade its sewer system by March 2023 or face severe fines and corrective action.