Sewer bonds exchanged for tax-backed bonds

The city of Wimberley voted to exchange sewer system bonds from revenue-backed bonds to taxbacked bonds as required by the Texas Water Development Board.

The new bonds open up the possibility of the city creating an ad valorem tax to pay back the TWDB loan for the sewer system. The previous bonds could only be paid with revenue from the system. The new bonds can still be paid with revenue from the system, but the city would have the option to raise the tax and use the funds to pay for the loan also.

“Though you are levying a tax tonight to pay debt service on the bonds when you go through your annual budget process you set a tax rate sufficient to pay debt service on the bonds,” Stephanie Leibe, attorney with Norton Rose Fulbright, which represents the city on sewer system bonds, said. “If you have enough available revenues that tax rate is zero.”

It was clarified during the meeting that other revenue sources from the city could be used to pay the debt also, not solely revenues generated from the sewer system.

“We have come to a point where we either need to move forward or not do this. I am a very conservative individual who is against taxes,” Councilmember Gary Barchfeld said. “I do not see it as a tax but more as a guarantee that Texas Water Development Board uses to insure the loans that they make.”

The city of Wimberley already has a similar tax, currently set at zero percent, that was issued to pay off the design loans for the sewer system. That tax will dissolve once the design loans are paid off, of which there is only one payment remaining. The new tax will be levied, at whatever percent the council determines is necessary to repay the loans, for the life of the sewer system construction loan.

The exchange of bonds was required by the TWDB as part of the conditionally approved change of scope to the wastewater project to transition from a cityowned treatment plant to Aqua Texas for treatment. There were largely two stated factors that resulted in the requirement including delays in the construction of the project, which will delay revenues, as well as the removal of treated effluent returning to Blue Hole Regional Park, which was part of a process that would have previously allowed the city to pledge up to $200,000 per year towards the project as system revenues.