Sherman recently issued $4 million in debt to fund stormwater projects needed in the city.
The Sherman City Council unanimously approved the issuance of $4 million in certificates of obligation to improve flood control and take on projects that were identified in the 2013 Stormwater Master Plan. The $4 million in bonds is $3 million less than was originally approved for issue by the council.
“We determined about $3 million of these $7 million of projects would potentially qualify for the special Texas Water Development Board funding,” Director of Finance Mary Lawrence said, explaining the alternate funding source would be at a below-market interest rate with some of the projects eligible for some partial principal forgiveness. “We should know something about them in the second quarter of 2018 — which of these projects might qualify.”
When the $7 million bond issuance was discussed by the council in September, city staff said land acquisitions, detention ponds, drainage improvements and an update to the floodplain map were among the projects expected to be undertaken with the funds. City Manager Robby Hefton said the funds could also be used for increasing drainage capacities through culverts and similar projects.
Lawrence said the $4 million issuance will fund projects that don’t qualify for money from the Texas Water Development Board or Federal Emergency Management Agency.
In a document prepared for the council, city staff said the bonds would be repaid through funds collected through the city’s stormwater utility fee collected on utility bills. The stormwater fee collects $1 per month from customers with one equivalent residential unit, which works out to 3,400 square feet of impervious area. Customers with less than that amount of impervious area on their property pay less than $1 and those with more pay per equivalent residential unit that they have on their property. City staff estimate the fee will bring in $458,000 per year for infrastructure projects.
After the city experienced significant flooding in August, a number of Contemporary Drive residents attended the council’s Aug. 21 meeting to ask for help with their continued problems with stormwater runoff. At the time, Hefton said improvements to areas like Contemporary Drive would be among the first to utilize funds from the stormwater utility fund.
Garry Kimble, managing director for the city’s financial adviser Specialized Public Finance, told the council that the response to the city’s debt issuance was impressive.
“I’m very pleased to report that we received seven bids representing 39 different firms,” Kimble said, noting the low bid was a 2.87 percent, 20-year financing rate from Hilltop Securities. “This compares to the earlier deal that we did with the city in the spring time of 3.24 percent.”
The previous deal Kimble referred to was an $18.8 million issuance of certificates of obligation the city made in March to pay for work on city streets, bridges and the relocation of the city’s Blalock Park Fire Station.
During the 2015-2016 fiscal year, the city issued $6.9 million in debt to fund the remodel of the Sherman Public Library and work on a number of street projects. Earlier this year, Hefton told the council he expects Sherman will issue more debt during the 2017-2018 fiscal year to continue the city’s infrastructure and transportation programs.
Documents provided to the council during its April budget planning meeting show an expected total of $16 million in debt to be issued for work on city streets and parks next year, though Hefton said at the time that amount may ultimately change. The preliminary division of the proposed debt issuance for next year shows $3 million going to work on Friendship Road, $5 million being used for Travis Street West, $2 million for work on Preston Club Road, $4 million for the construction of ball fields at Pecan Grove Park West and $2 million for additional city parks.
For its most recent bonds, Kimble told the council there was nothing unusual to report about the issuance.
“Ninety percent of the time rates have been higher than they are today in the market,” Kimble said. “In historical terms, it’s a very good time to lock this in if you have to borrow money.”