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Sherman eyes $30M in bonds amid low rates

Michael Hutchins
Herald Democrat
Sherman city leaders recently gave staff  approval to start look at issuing up to $30 million in debt for future projects.

The city of Sherman could soon issue debt for future projects down the road. The Sherman City Council recently gave city staff guidance to look into issuing up to $30 million of debt ahead of expected road and facility projects.

The move comes as city leaders have considered issuing debt ahead of schedule to take advantage of historic-low borrowing rates that are projected to increase.

After determining there was an appetite in January, city staff presented a list of possible projects to determine how big that appetite was.

"We talked through the theory of the good, the bad and the ugly of issuing debt earlier than we would normally issue it, and this is really a continuation of that discussion a few weeks ago," City Manager Robby Hefton said.

Hefton presented the council with a $40 million list of projects that could be funded through early bond funds. In many cases, these are projects that are not ready to break ground or are somewhere in the development and design phase.

The largest of these projects, and the city's highest priority, is the proposed $15 million Sherman Police Department, which would be built along the FM 1417 corridor on Northgate Drive.

If bonds are issued, construction on the police station could begin in 2021.

The other projects primarily focused on road infrastructure, including some that will service future planned developments.

The funds could be used to finance road infrastructure in the proposed Bel Air Village development along the intersection of FM 1417 and U.S. Highway 75.  

Council members debated on if the city should issue debt for this infrastructure, rather than selling land to finance the improvements, in January, with multiple members of the council voicing concerns.

"To move forward with the project and sit on the land without knowing what we are going to get for it I think could be premature," Council Member Shawn Teamann said in January.

Bonds could also be used to finance improvements along Moore Street, which has seen interest from developers due to the construction of Sherman High School. The council approved requests related to a residential development along Moore Street during its first February meeting.

"Honestly, in my opinion, Moore Street should be bumped up because we've approved some stuff tonight," Council member Willie Steele said.

Other projects are further down the line, and may not see work within the next year. Council members questioned why infrastructure for a hospital along  West Travis was listed as a priority considered for debt when the project has not been formally green lit yet.

Likewise,  improvements for Heritage Ranch, a mixed-use development near Travis street and U.S. Hwy. 82, was also listed despite the fact it was only announced in recent weeks.

"That one is moving fairly quickly,: Hefton said. "I have a meeting with those developers this week."

Meanwhile, other projects were listed as lower priority, including further enhancements of the Pecan Grove Park playing fields. Hefton said he would like to see this project, but it can wait.

"That park can function without the improvements that would be contemplated there, but I would like to finish that," he said.

However, Hefton warned the council that he was less focused on which projects the council would like to pursue and more on how much it would like to spend at this time.

As projects go through development, some may reach the point where the city needs to finance improvements faster than others, he said.

Several council members  voiced concerns about issuing debt for projects down the road, noting that there are debt service payments regardless of if the city spends the bond funds immediately or not.

"Basically we are asking to issue debt on something we donot have teed up," Teamann said.

Hefton noted that projected growth could offset some of the debt service and make holding the funds less of a budgetary drain.

Conversely, Council Member Josh Stevenson said the city could potentially move some projects up so that these funds are not sitting idly.

When the council held informal poll, it was determined that the council wished to pursue about $30 million in bonds. Teamann came in on the low side, stating he only wished to issue $15 million — the cost of the police station.