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Hidalgo County Drainage District No. 1 heard a presentation on the financing of $84 million in bonds for drainage improvement projects approved in the November election in their Tuesday, Jan. 22 meeting. The district board also approved a one-year extension of Godfrey Garza’s consulting contract – valued at $122,400.
Cris Vela of First Southwest presented several possible financing scenarios for the drainage bonds.
He told the drainage district board the lowest point in a 20-year period for bond costs for entities with ratings similar to the HCDD was 3.27 percent in December of 2012. Costs are edging back up and the average cost is 3.53 percent.
The district increased its total tax rate by 22 percent in 2008 and by 42 percent in 2009 due to the issuance of bonds.
Currently, the drainage district is trying to finance $84 million of the $184 million project for the Raymondville Drain Project, the system acquisition, the La Villa Reclamation Project plus similar smaller projects. The voters approved the bond issue in November 2012.
Vela presented six scenarios for a 20-year, a 25-year and a 30-year financing or wraparound. With regular financing the district would immediately start paying principal whereas with a wraparound, only interest would be paid for the first few years and then the district would start paying principal at a point when it expected to have more revenues. However, it would end up paying substantially more interest in the long run.
With 20-year financing the interest rate would be 3.21 percent for a total cost of $117.2 million. The owner of a $50,000 home would pay an additional $11.90 annually while the owner of a $150,000 would pay $35.69.
With a 20-year wraparound the interest rate would be 3.47 percent. The total cost would be $126.9 million. The owner of a $50,000 home would pay an additional $10, while the owner of a $150,000 home would pay an additional $30.01 annually.
With a 25-year finance program the interest rate would go to 3.62 percent and have a total cost of $131.6 million. A $50,000 homeowner would pay $10.69 annually while a $150,000 homeowner would pay $32.08 annually.
With a 25-year wraparound the interest rate would be 3.69 percent. The total cost of the bond issue would be $134.9 million. The owner of a $50,000 home would pay $10.69 annually while the owner of a $150,000 would pay $30.86 annually.
For 30-year financing the interest rate would be 3.87 percent. The total cost of the bond issue would be $146.3 million. The total cost for a $50,000 homeowner would be $10.53 a year while the total cost to a $150,000 homeowner would be $31.58.
For a 30-year wraparound the interest rates would be 4.13 percent. The total cost of the bond issue would be $164.4 million. The annual cost to a $50,000 homeowner would be $11.12 while the cost to a $150,000 homeowner would be $33.37 annually.
The advantage to the drainage district of the 25-year wraparound is it would pay no principal or interest in 2013 and only $265,000 in principal and $5 million in interest in 2014. The down side is this option would cost taxpayers an additional $17.7 million in financing costs.
In other business, the commissioners approved a one-year extension of Godfrey Garza’s consulting contract (Integ Corporation) at a monthly salary of $9500 base salary, $600 car allowance and $100 for cell phone. The drainage district does not pay his retirement or medical insurance. Garza said there were projects related to the old bond issue that he needed to see to completion. He would not be supervising any of the new bond projects.
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The Progress Times is the hometown newspaper for the local communities of Mission, Sharyland, Alton, Palmview, La Joya and surrounding areas in Western Hidalgo County. We have a staff of veteran reporters who work diligently every week to bring our readers the latest news as it affects their hometown area and people.