By AMANDA KIMBLE
TheFlashToday.com
STEPHENVILLE (November 2, 2016) – The Stephenville City Council approved issuance more than $2 million in debt on Tuesday.
Mayor Kenny Weldon opened the discussion, saying the funding would be utilized for the TSU Methodist Branch Sanitary Sewer Relief Line Project, a project currently underway, running a sewer line from new construction at Tarleton State University to the city’s wastewater treatment plant.
The city received bids from First National Bank Texas (FNBT) Stephenville, DBA in Stephenville as First Convenience Bank; North Carolina based BB&T Bank; Farmer’s Branch based The Independent Bankers Bank; Vectra Bank of Colorado; and First Financial Bank.
FNBT won the bid after offering the lowest interest rate, 1.84 percent and including the option to pay back the loan at any time without penalty, according Eric Macha, a representative of FirstSouthwest Securities. He said the certificates of obligation would produce about $2 million in construction dollars for the project with the remaining $40,000 covering related costs.
Prior to receiving the full support of the city council, a few council members referenced the issuance of debt as it relates to current cash on hand and how it ties into a potential future project.
Council member Rhett Harrison asked how much money the city had in reserves, to which Finance Director Walter Wood replied, “about $2.5 million.”
Wood also said the idea was to reserve the funds in anticipation of another potential project and that he was trying to maintain 25 percent of the budget. The anticipated improvements, the Eastside Sanitary Sewer Project, have been on the drawing board for years, but council member Carla Trussell expressed echoed concern she also voiced last month about issuing debt in anticipation of a project that has not yet been approved by the council.
But, following a question from council member Doug Svien, Wood explained if the council doesn’t chose to address eastside project, Wood said the city could pay back the $2.04 million next year without penalty. He also said if the Eastside Sanitary Sewer Project is approved, the money in reserves could be used as startup funding.
The needs city’s eastside, was explained in a report by the Texas Water Development Board as an “expansion of the sanitary sewer collection system, opening up approximately 19,000 acres east, north and northwest of the current service area to accommodate increased demand from the growing business industry and Tarleton State University.”
While Harrison agreed with Trussell’s concerned about acting prematurely, saying he planned to oppose obtaining the debt when the city had cash available, he said based on interest rate and the fact the debt could be paid back early without penalty, he would support the measure.
The issuance of the debt received the full support of the city council.
The city is expected to receive the funding December 1, and the first interest payment will be due February 15, 2017. The interest payment, which equates to about $9,000 per month, was included in the current fiscal year’s budget.
Summary of Financing at a Glance
Construction Proceeds: $2 million
Interest Payment Dates: February 15 and August 15
First Interest Payment: February 15, 2017
First Principal Payment: February 15, 2020
Maturity/Final Payment: February 15, 2027
Closing Date: December 1, 2016
Interest Rate: 1.84 %
Optional Redemption: Anytime @ par
Information Provided by FirstSouthwest Securities
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