More debt may be on the horizon after the Devine City Council took the first steps toward authorizing Certificates of Obligation up to $1 million to finance capital improvements to the Devine Municipal Airport during a Special meeting last Tuesday, April 6.
The issuance of the bonds, if authorized, is set for the Regular Council meeting scheduled for June 15.
Financial advisor Mark McLiney of SAMCO Capital Markets and bond attorney Clay Binford of McCall, Parkhurst & Horton were on hand to advise Council about Resolutions authorizing both the publication and posting of a notice of intention to issue CoOs to finance airport improvements, as well as the posting of a notice of Public Hearing about the same.
While the airport has been discussed in Executive Session in recent meetings, it hasn’t been addressed in open session.
Following a request from the News after the meeting for clarification about what the CoO funds would be spent on, Mayor Cory Thompson emailed the following response from City Hall as per City Attorney Tom Cate:
“The funds from the Certificates of Obligation, along with other funds such as our Ramp Grants from the Texas Department of Aviation, will allow the City to make much needed improvements to the airport, such as restrooms, repairing and maintaining taxiways and aprons, and yes, the purchase of currently privately owned hangars.“
At the April 6 meeting, McLiney explained the steps Council was poised to take.
“What we’re going to do for today, is if you authorize this, we’re going to begin looking and talking with your depository and other banks about the possibility of this loan,” McLiney said. “You may remember we talked about a 13-year [loan]. We’re going to try to stretch it to 15 years to reduce the annual payment.”
According to the notice of intention to issue, which can be read in full in this week’s edition of the News, the principal of the City’s outstanding debt is $475,000, or $489,891.14 including interest.
That number does not include other debt, the city already owes, designated as “self-supporting,” such as nearly $10M in Texas Water Development Board loans taken out for the water pipe replacement project currently on hiatus, or the $1.1M in CoOs issued to fund the replacement of water meters throughout the City.
Those debts are being repaid through funds generated by utility payments.
Assuming an estimated interest rate of 3 percent, the combined principal and interest of the new proposed airport CoOs is $1,227,750, which will be repaid through both ad valorem taxes, “and from a lien on and pledge of certain revenues received by the City from the ownership and operation of the City’s airport system.”
“What the notice allows the public to do is know what you’re spending, how much, what the duration is, what the expected cost is, and what the proceeds are going to be used for,” Binford said. “And it gives them an opportunity to either approve that by doing nothing, or if they believe it’s a problem, that you should vote these obligations first, they have the ability to go in and petition you. And if more than five percent of the electorate puts a petition before you about the issuance of the debt, you can’t issue the debt until you conduct that election and successfully pass.”
State law requires the notice be published prior to issuing the CoOs.
“What you’re doing tonight, you’re not incurring debt, you’re not incurring a liability,” Binford said. “All you’re doing is authorizing us to post and publish the notice that you’re going to consider that at some point in the future.” (Scheduled for the June 15 meeting.)
Mayor Cory Thompson said that while the CoOs will be covered through normal property taxes, it won’t look that way to the public.
“That’s not the intent, right?” District 5 Councilwoman Debra Randall asked.
“But it’s not going to look that way when the intent is issued,” Thompson said.
A motion by Randall and District 1 Councilman Rufino “Flipper” Vega to approve Resolution 4-21A authorizing the notice of intention to issue the CoOs passed 4-0 with support from District 2 Councilman Steve Lopez and District 4 Councilwoman Kathy Lawler.
District 3 Councilman David Espinosa was absent.
Council also approved posting notice of a Public Hearing regarding the CoOs.
Binford explained that per federal tax law, the quickest and easiest way to qualify for financing for tax-exempt bonds requires holding a Public Hearing and posting notice of it beforehand.
“Because of the leniencies that the COVID situation has provided to us, we can have that telephonically,” Binford said. “So we will publish and post a telephone number if anyone calls in and has objections.”
“So we don’t actually have to have an actual Public Hearing here,” Thompson said.
“Correct,” Binford said. “We will conduct that on your behalf and we’ll publish the number for people to call in.”
A Lopez-Randall motion to approve Resolution 4-21B authorizing posting of a notice of Public Hearing regarding the issuance of CoOs to finance airport improve passed 4-0.
Thompson shared his thoughts about the matter later, after the News asked, “People are wondering what’s going on with the airport and Certificates of Obligation up to $1 MILLION. What are we buying with this?”
Noting that he only votes in the case of a tie, and that his opinion doesn’t represent the City or Council he replied, “Although I am not going to comment on any of the particulars of the current items of discussion and risk violating the laws regarding executive sessions, I will say that Council is aware of how I feel, and if I had a vote I would vote against the CoO’s at this point in the process,” Thompson said. “My reasoning behind my vote would be pretty much inline with my reasoning behind my vote against the [golf course] clubhouse renovation back on January 8, 2019.”
At that meeting, Thompson voted against the clubhouse renovation plan presented by Lyndsay Thorn, then the architect on the project (see “Clubhouse renovation plans approved, capped at $350k” in the Jan. 16, 2019 edition of the News).
Thompson did later break the tie and cast the deciding vote to go into contract with SG Golf Management at a rate of $32,536 a month or until the turnkey operation of the clubhouse renovation was finished, now 16 months ago.
See Devine News website for the contract between The City of Devine and SG Golf Management.
The next Council meeting is scheduled for next Tuesday, April 6, while the airport CoOs are set for a vote at the June 15 meeting.
By Marly Davis and K.K. Calame