City to borrow $1.5M for sewer overhaul

Mulls taking on $6.7M construction project next year

SAN BENITO — City commissioners voted 3-1 last night to borrow $1.5 million to fund the first phase of an $8.2 million state-mandated sewer system upgrade.

Commissioners agreed to sell $1.5 million worth of certificates of obligation with an interest rate of about 2.09 percent through 15 years to fund the planning and design phase of a project to overhaul the six old sewer lift stations.

“It’s an excellent time for us to be borrowing money,” Don Gonzalez, the city’s financial advisor with Estrada Hinojosa in San Antonio, told commissioners, noting the Federal Reserve cut interest rates a few days earlier.

The project stems from a 2012 agreement with the Texas Commission on Environmental Quality that requires the city to upgrade its sewer system by March 2023 or face severe fines and corrective action as a result of sewer spills in 2009 and 2010.

As part of the finance package, the San Benito Economic Development Corporation agreed to earmark $65,000 during a 10-year period, a move which helped dodge as much as a 2-cent property tax hike and a possible boost in one of the Rio Grande Valley’s highest water rates.

“There’s no proposed tax increase this year,” City Manager Manuel De La Rosa said.

Commissioner Tony Gonzales cast the lone dissenting vote after officials pointed out the overall project’s proposed $6.7 million second phase could force about a 2-cent increase in the city’s 72-cent property tax rate and boost one of the Rio Grande Valley’s highest water rates if commissioners go ahead with the plan next year.

“We’re not saying there’ll be a definite tax increase,” De La Rosa told commissioners, referring to plans to borrow $6.7 million next year to fund the project’s construction phase.

De La Rosa said he’s counting on increases in the city’s total assessed property values to help offset any tax increase.

The city hasn’t increased its tax rate in about six years, Gonzalez said.

But next year, water rates might be going up to help fund the project’s proposed $6.7 million second phase.

“You’ve got to get your water rates up for the first year’s payment,” Gonzalez said, referring to the city’s debt payment on the proposed $6.7 million bond issue. “You probably have to get the water and sewer rates higher to cover the payment.”

Gonzalez said he planned to close the $1.5 million bond sale on Sept. 11.

Meanwhile, De La Rosa said he plans to complete the overall project before Thanksgiving of 2022 to meet the TCEQ’s March 2023 deadline.

For more than a year, commissioners have battled over the proposed project to upgrade the aging sewer system.

Last year, Mayor Ben Gomez and Commissioners Rene Villafranco and Carol Lynn Sanchez appeared to support a proposed 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.

For nearly 10 years, the multimillion-dollar sewer system overhaul has loomed over one of Texas’ 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.