Will San Benito face tax or water rate hike?

SAN BENITO — After more than a year of debate, city commissioners have taken the big step to fund the first phase of a state-mandated sewer system overhaul carrying a projected $8.2 million price tag.

Earlier this month, they voted 3-1 to borrow $1.5 million through the sale of certificates of obligation to fund the planning and design phase of the project to rebuild six sewer lift stations.

Don Gonzalez, the city’s financial advisor with Estrada Hinojosa in San Antonio, said he expects to lock a 2.09 percent interest rate over a 15-year term.

Then next year, officials plan to consider approving a proposed $6.7 million bond issue to fund the lift stations’ construction.

Now, there’s no turning back on that project, City Commissioner Tony Gonzales, who cast the lone dissenting vote against passing the $1.5 million bond issue, said last week.

“We have to go for that because they already passed the first one,” Gonzales said, referring to the commission’s vote to fund the project’s $1.5 million planning and design phase.

Commissioner Rick Guerra describes commissioners as “locked in” to fund the proposed construction project.

“They have us cornered. We have to do it or the $1.5 (million) is blown,” Guerra said, referring to passing the proposed $6.7 million bond issue.

Apparently, commissioners can’t push the project back as a state deadline creeps closer.

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 about 10 years ago.

So City Manager Manuel De La Rosa said he plans to complete the overall project before Thanksgiving of 2022 to meet TCEQ’s deadline.

“It’s frustrating where we’re at,” Guerra said. “We need the lift stations.”

Tax or water rate hike?

As they planned to finance the $1.5 million bond sale, officials set aside $65,000 from the San Benito Economic Development Corporation and $17,230 in federal Community Development Block Grant money to offset any increase in the city’s property tax rate of 72 cents per $100 valuation or a hike in one of the Rio Grande Valley’s highest water rates.

But the proposed $6.7 million bond issue could force a tax or rate hike.

Gonzales blamed officials for failing to disclose the extent to which the proposed $6.7 million bond issue could drive up taxes or water rates — before commissioners passed the $1.5 million bond issue.

“The people have a right to know because they’re going to pay for it,” Gonzales said.

According to financial advisor Gonzalez’s service schedule, the proposed $6.7 million bond issue could drive up taxes about 3 cents.

“Either the taxes or water rates — something will go up,” Guerra said. “I hope not both. It’s the unknown.”

Earlier this month, Gonzalez told officials to launch a water rate study in case they need to boost rates to help pay back the bonds.

“It is premature to speculate what a projected increase may or may not be until a rate study has been commissioned and reviewed,” De La Rosa stated last week.

Meanwhile, De La Rosa said he’s counting on the city’s rising total assessed property values to help offset any tax or water rate increase.

Now, the city’s monthly residential water rate stands at $20.59 for up to 2,000 gallons for homes with 5/8-inch meters while its sewer rate is set at $29.09 for up to 2,000 gallons.

“We’re already high in the water and sewer,” Commissioner Gonzales said. “We’re the highest in the Valley, I think.”

Meanwhile, Guerra said officials should consider taking out a low-interest loan through the Texas Water Development Board rather than borrowing from a bank.

According to Guerra, the Water Development Board could offer an interest rate as low as 2 percent.

“I’m pushing for the Water Board. I’m trying to get the best rate for San Benito without breaking their back,” Guerra said, referring to taxpayers.

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.