San Marcos Mercury | Local News from San Marcos and Hays County, Texas

June 4th, 2009
Kyle council to consider more debt

Executive Editor

KYLE – City officials in Kyle are trying to figure out how they can make a variety of equipment purchases without issuing debt that will last for 20 years or more.

City Finance Director Charles Cunningham presented tax note financing as an option to the city council at Tuesday night’s meeting. Cunningham said the tax note debt issue is not as complicated as more conventional methods, such as certificates of obligation or revenue bonds, and it can be paid in a shorter term.

Cunningham said the city could expect an interest rate of 3 to 3.5 percent on a seven-year note.

The finance director presented a variety of equipment purchases and other improvements the council has discussed in recent months. If the council were to fund all of them, it would have to borrow $6.1 million.

Cunningham said the debt service payment on a $6.1 million tax note would come to about $971,000 per year for seven years. The debt service would add 4.37 cents to the city’s ad valorem tax rate, which now stands at 37.31 cents per $100 of taxable value.

Among the items that could be purchased is a fleet of backhoes, loaders, paving machines and trucks that would come to $643,763. The list also includes a new SCADA system ($393,000) to monitor and regulate the city’s water supply, a new police records management system ($275,000), and an upgraded meter reading system ($1.2 million).

The city also would use the money on capital projects, such as the historic city hall restoration ($900,000), an administration building for the parks and recreation department ($450,000), the land purchase for a library on Sledge Street ($350,000), restoration of the city’s old train depot ($250,000) and fees for engineering work on a recreation center ($1.2 million).

Cunningham said tax note financing for such projects is “considerably better than certificates of obligation or general obligation bonds because of the short time frame of the issue … Ninety percent of the stuff (to be thus purchased) we’ve talked about  at one time or another. We just haven’t pulled it all together.”

Kyle has issued about $66 million of debt in the last six years for more than a dozen big ticket items, including the construction of Kyle Parkway, a new city hall, an east side fire station, a re-alignment of SH 150, infrastructure improvements to facilitate the Seton Hospital development and projects for the original part of town such as downtown streetscaping and sewage upgrades.

In addition to those projects and the purchases proposed under the tax note plan, the city also is looking to build a new library, a new police station and a recreation center, which figure to total about $30 million. When it’s all done, the city could end up with total debt issues of about $100 million.

Of the city’s 37.31-cent tax rate, 20 cents is earmarked for debt service. The present tax rate represents an increase of 10.24 cents beyond the 27.07-cent ad valorem rate for FY 2008, thus pushing it well past the 33.29-cent rollback rate. When the council passed the present tax rate, however, no petition circulated to force a rollback election.

City staff has long argued that all the purchases funded by debt are necessary investments, adding that the resulting tax rate is competitive with other cities on the Austin-San Antonio corridor. Kyle City Manager Tom Mattis told the city council during last fall’s budget deliberations that staff expects to propose ad valorem rates of 44.12 cents in Fiscal Year 2010, 48.83 in FY 2011 and 49.93 in FY 2012 before coming back down to 46.42 in FY 2013.

The city council took no vote on the tax note financing proposal Tuesday. However, the matter is certain to come up again in the near future, after councilmembers have taken time to digest the information.

City staff argued most emphatically for the street equipment, the SCADA system and the police records management system.

Mattis said the city, which has grown from an official U.S. Census figure of 5,340 in 2000 to about 30,000 today, is soon to feel the need for a street maintenance program. Because most of the city popped up in the last ten years, so have most of the streets. But city officials say age is starting to show on those streets.

“Part of the equipment purchase is that we can take the next step to a true street maintenance program,” Mattis said.

Cunningham said the purchase of a new SCADA system to monitor the water supply is an “absolute necessity.” With growth, the city now pumps about 900 million gallons of water per year. Officials said the city is in perpetual danger of over-filling water towers and over-pumping water permits without the new equipment.

“With our current SCADA system, the only reason we haven’t had a significant issue at this point is pure luck and will power,” Kyle Assistant City Manager James Earp said.

Kyle Police Chief Michael Blake has never been happy with the records management system he inherited when he started the job in early 2008. Tuesday, Blake told council that “our present police records management is appropriate for school districts with eight to 12 officers, but not for a 24/7 law enforcement agency.” The Kyle Police Department (KPD) is budgeted for 30 sworn officers.

Councilmembers voiced little objection to the proposed purchases and debt issue on first glance. The exception was Mayor Miguel Gonzalez, who mentioned to Cunningham that “the software stuff looks a little over the top,” referring to the SCADA system, the meter reading software and the police records management system.

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