Edinburg Approves $6.9M Bonds For Landfill Improvements, Won’t Raise City Taxes
Arnoldo Mata
Edinburg TX – The Edinburg City Council last night approved issuance of $6,997,000 in bonds for improvements to the city’s landfill. The bonds will be paid over a period of 10-20 years from revenues collected from fees, particularly from other cities in the county.
Hidalgo County is served by four major active landfills: two operated by the City of Edinburg, the BFI/Donna landfill and the Peñitas landfill.
In terms of capacity, one Edinburg landfill has the largest remaining capacity of about 12.5 million tons and the longest projected site life of 67 years, covering 174 acres. This is a Type IV Construction/Demolition landfill. The second Edinburg landfill follows with approximately 8.1 million tons and 17.7 years of site life.
The BFI/Donna landfill has a capacity of roughly 2.5 million tons and 5.3 years of site life, while the Peñitas landfill is the smallest, with about 13,000 tons and a site life of just under four years.
Ascencion Alonzo, Director of Finance, presented the item to the Council along with financial advisor Bobby Villareal and bond counsel Arnold Cantu.
City Council Member David White asked, “Will our taxes rise with this?”
Mr. Alonzo responded, “No, sir. No, sir. This would not increase that.”
According to Villareal, the city was looking at an interest rate of about 4.78% when the item had first been presented to the city council. “This morning, in pre-market, the rates were going our way to about 4.5%, and then you had three times more interest in the bonds you had out there than the supply. So, there was a lot of interest in Edinburgh today in the market. In negotiating with the underwriters, we dropped it down even further. So the interest rate is about 4.47%.”
Council Member Dan Diaz asked, “On the on the interest rate, is there a way that we can pay that sooner? Pay it down?”
Villarreal explained that the bonds will be callable in 10 years. “So that’s generally the practice when you go out to the open market is usually within 10 years. At that 10 year mark, that’s when the people that want to invest in your bonds, they want to be guaranteed some sort of payout for the next 10 years. Even though it’s a term of 20 your ability to pay off or to refinance in the 10th year is available to you.”
Diaz asked, “And just so people understand, these are revenue bonds and the reason we don’t pay off with the revenues is because you’re using the revenues for the operation at the same time.”
Villareal responded, “Yes, sir. The pledge is a tax rate, but it’s really being paid by the revenues of the system. But the reason you do that is that so you get a better interest rate. If you only did the pledge on solely on the revenue, then this would be a much higher interest rate. So this is an effort to save you money.}
Diaz added, “And just so everybody knows, the solid waste is a huge money maker for the city. It’s one of the reasons why we’re able to keep or lower our tax rate. So if we were to lose any sort of ability to operate that, then we would have to raise taxes because of that.”
According to Mayor Ramiro Garza Jr., “It doesn’t affect our ability for operations or to even issue other debt for our streets and drainage and all that. Is that correct?”
Villarreal responded, “Correct. You still have capacity on that side.”
Garza noted that the city had never really had to issue bonds for solid waste improvements.
Mayor Garza asked why that happen? “What, that’s questions that I’ve gotten also related to why we’re doing this (if the city had not needed to issue bonds previously for solid waste improvements).”
“I’m not sure,” Alonzo said. “I wasn’t here when the first issuance for that first phase was done. This fund generates enough revenues for the operations and also has additional funds for transfers out. But it’s always, was always self-sustaining.”
“We always had a reserve,” Garza said. “So did that get depleted or what happened?”
“Yes, sir,” Alonzo responded. “That got depleted. We’ve put it back this year and we’ll be funding that again, but those funds were used.”
“Let’s make sure moving forward that fund is set aside as we do as part of our budget. I don’t know why that was done, but we have make sure that does not happen again.”
“Can you, just for the record, find the date that the ordinance was changed, where the reserve funds were available for other projects? Do you know that?”
“I don’t have the exact date, but it was in 2019 that ordinance was dissolved for utility fund and for utility depreciation also,” Alonzo explained.
“And that had never happened in, as far as in the history of City?” Diaz asked.
“No. We had an ordinance in place that required us every year to budget a bounce to set aside for anything that,” Alonzo said. “Any big capital expenditures that would come up that were not part of operations, whether it be a big water line or a big project, a solid waste, a big machinery. Their machines are very expensive. So that fund was used to subsidize anything that was not out of operations, regular operations.”
If it was a $500,000 piece of equipment that was needed, we would go to that reserve fund. So it was like a savings for replacement of appreciable items whether they be machines or water lines or all of their other major improvements.”
Diaz asked that staff to provide the background on that and bring back the ordinance.
Garza said the city is already started doing this as part of the budget process.
Edinburg resident Fern McClaugherty spoke up on the issue. “You talked about you had funds that were there, and I do know that this is the one department in the city that makes money. I got all the cities and even Willacy County brings some (solid waste) over. We got millions coming in. How in the world did you get and allow, and I know y’all are gonna say like the gentleman just now, I wasn’t here before.”
“That is a true statement. So 2019, I don’t think any of us were here,” Garza responded.
“But it is your responsibility now. Yes. And our thing is what keeps you off from doing it again? Or anyone, right? And like I said, this was the cash cow. This is the one that brings it in. And you give it to departments that either weren’t bringing anything in or whatever the reason. And that’s where the questions have come to me. What was so important that you had to pull it out?”
“We have to ask folks that were here in office in 2019, but I can tell you at least from this standpoint we’ve brought it back,” Garza said. “I started asking ‘where’s our depreciation reserve fund?’ And I was told that it was done away with. I said, we have to bring it back. So I’m glad it’s been brought back and so we can pay for these things in the future. Maybe not have to issue bonds.”
“I think I’ll be a little more direct and you’re going get it from me,” White said. “Just go back and look at what’s happened in the past. You gave me the $6 million that came out of that fund and I’m going to spend it, and I’m going get some more votes, aren’t I? So I can spend. If you go back to the councils back then, and you just have to do a little research and look. These guys are not as vocal as I am and straight out, and I’ll tell you that’s what happened.”
“I was still with the police department back then. You should see all the TVs and stuff that got put up in there. You should see if some of the city resources that started really coming out, some of the instead of buying the F two 50, that was the regular one. Next thing we’re getting the XLTs and we’re getting everything else.”
“The higher package. And all that stuff had a cost. Everybody loved it and they all seen it. Hey, look at the growth of the city of Edinburg, but somebody’s paying for it. And all we did, all that happened at that time was we kicked the can down the road and now we’re trying to catch the can.”
“And that’s what this council’s doing. We’re catching the can and we’re going to put it back on and if somebody else kicks it down the road, there’s nothing we can do about that. That’s going to be the next party that we as a community put back over here.”
“ Did you not put an ordinance that it can’t be done?” McClaugherty asked.”
“Ordinances can be redone,” White added. “The only thing that has to come back to the people is a charter amendment. Every council can change the ordinance. We can change the ordinance today and we can make it all that stuff and then three days later we can change it back if we want. It’s just what you get and what you put in office. And that’s what it all comes down to. I’m getting off my soapbox Mayor, sorry about that.”
“Fern, who you elect matters,” Council Member DeLeon added.