The Liberty Hill City Council said no Tuesday to a proposal to issue $2.28 million in revenue bonds that would have allowed the city to connect two new water wells, make improvements to the water system’s infrastructure, and refinance two higher interest loans incurred by the Liberty Hill Water Supply Corp.
The bonds, which would have been re-paid over 20 years with revenue generated by the water system, carried interest rates of 1 to 4.85 percent.
Explaining that they did not have enough time to study the paperwork before Tuesday’s special called meeting, Council members Lisa Kirk, Byron Tippie and Mike Crane voted no after an extensive presentation by city staff, financial and engineering consultants. Council members Jack Harkrider and Charles Canady voted yes. Mayor Michele “Mike” Murphy, who can not vote except to break a tie, said she supported the proposal.
It was the City Manager’s second attempt in as many weeks to find low-interest financing to connect two water wells, which will be constructed using county grant funds.
Two weeks ago, the Council took no action on the preferred choice of funding – certificate of obligation bonds – after a petition containing the confirmed signatures of 51 city voters protested the move.
On Tuesday, the City’s financial consultant, Chris Lane, said blocking the option of using certificates of obligation cost taxpayers $82,000 or $4,000 per year over 20 years in that the revenue bonds carried a slightly higher interest rate.
Mayor Murphy went a step further, adding the fees of professional consultants, attorneys and engineers who spent time securing the first rates and then started from scratch to create a second proposal for revenue bonds. Those additional fees brought the total closer to $120,000, she said.
Jamie Williamson, owner of The Leader newspaper, filed the petition three hours before the Council was scheduled to take action Nov. 21 on the certificate of obligation bonds. By law, if the Council decided to pursue the certificates of obligation over the objections of the petitioners, it would have to put the item on the ballot in the May 2012 municipal election.
De La Rosa said Council members received the proposed revenue bond ordinance Monday afternoon. Typically, they receive their packets 72 hours prior to a meeting. He said the City did not receive the information from consultants until Monday.
“My problem with this is that there have been a lot of things expressed here tonight. I can’t comprehend everything and make a vote for it. I need to pray over it and make sense of it,” said Mrs. Kirk. “I’m sorry if what we did wasn’t the best thing.”
Crane was the first to voice opposition to the proposal.
“We’re skimming over this fast, and we’re talking about $2.28 million that someone will have to pay,” he said. “We’ve put a lot of burden on the city in the last two months. Yes, we will be giving up free money (grants for well construction), but we will be incurring debt.
“We’ve already raised taxes and now we’re raising water and sewer rates. We’re going to run everybody off. The population will dwindle and businesses will leave,” Crane said. “I have been uncomfortable with this from the get go.”
“All along the agreement was to use water revenue to pay the debt,” said Ms. Lane.
Councilman Jack Harkrider said updating the water system and owning the wastewater treatment plant puts the city in control of the utilities and open the door to future development.
“We will see a lot more businesses coming in here,” he said. “These people want city services. We can constantly kick the can down the road, but when we pay later, it will cost a lot more,” he said.
“You guys are trying to talk me into something I’m not sure about yet,” said Crane. “We need to try to work on getting out of debt instead of incurring more.”
Engineer Perry Steger said issuing revenue bonds to pay for infrastructure improvements shares the costs of growth with those coming to Liberty Hill in the future.
“By raising rates and funding these things out of the budget, you’re saying peole who are here today should bear all the weight,” Steger said. “People who show up later should also participate and pay for the growth rather than have everyone today pay higher rates.”
Crane asked whether the amount borrowed could be reduced, to which Ms. Lane responded that starting over a third time would cost the city even more and possibly cause the bank to question its involvement with the city.
In the proposal that failed Tuesday was $1.3 million that was to be used to pay off 40-year loans incurred by the LHWSC through the U.S. Department of Agriculture Rural Development. Ms. Lane said that by refinancing the loans at a lower interest rate with a 20-year payoff as opposed to 40 years, the city would have saved money.
After the vote was taken and the bond proposal was rejected, De La Rosa explained the vote’s consequences on consumers.
“We have five wells, but only three of them are in service,” he said. The water levels are so low in two additional wells that pumps would be damaged if allowed to run.
“We do not have enough water,” he said.
Without the funds to connect the two new water wells, the City would have to return about $250,000 in Community Development Block Grants issued by Williamson County. Those funds would be redistributed to other projects in other communities. Steger said returning the funds would likely cause county commissioners to question whether Liberty Hill is a good candidate to receive similar funding in the future.
“You bought a sytem that needs a lot of work,” De La Rosa said. “It’s not good business to keep a 40-year lease. That needs to go away, we need to clear the air (of debts created by LHWSC). We need our water system to be operational every day.”
In addition to the allocations to connect the new water wells to the water source and refinancing the USDA loans, $775,000 in revenue bonds would have been used to pay for miscellaneous system improvements. Council would have been advised by the Planning & Zoning Commission on how those funds were spent.
After the meeting, Tippie and Mrs. Kirk told The Independent that they were not opposed to the concept of financing improvements to the water system. Both agreed the city needed to expand its water supply.
“I just want to see if there’s anything we can shave off that ($2.28 million),” said Tippie.
Mrs. Kirk added that she did not feel educated enough on the issue to vote for it. She requested that the Mayor consider bringing it back to Council on Monday’s regular meeting agenda.
De La Rosa said he would speak with counsel about that possibility, adding that another funding source to connect the water wells is the Economic Development Corp.
The EDC has about $400,000 — enough to pay the estimated $150,000 in connection fees, he said.
In reference to a proposed water rate increase, which was also on Tuesday’s special meeting agenda, De La Rosa told Council members they were facing a rate increase regardless of their decision on financing capital improvements.
“We couldn’t maintain that system to standards (set by Texas Commission on Environmental Quality) without an increase. We can’t maintain at the same level in any plan for the future,” he said. “The system is operating at a loss.” (See Related Story on Page 1.)
Although stunned by the vote on the water revenue bonds, the Council proceeded to authorize staff and consultants to take the steps necesary to solicit bids for revenue bonds to acquire the wastewater facility from the Lower Colorado River Authority.
With no discussion, the item was approved in a 4-1 vote with Council member Tippie voting no.