La Marque council hears options for nearly $10 million state water loan; no loan agreement yet

The La Marque City Council on Jan. 27 heard detailed options for using a Texas Water Development Board (TWDB) Clean Water State Revolving Fund award of up to $9,985,000 to pay for water-system projects, but council members stopped short of accepting the loan and took no formal vote.

City financial advisers from Stifel Public Finance and the city’s bond counsel described the TWDB award, the steps the council would have to take to accept it, and how the loan might be repaid from water and sewer revenues instead of property taxes.

Why it matters: The TWDB loan is presented as a low-cost alternative to selling bonds on the open market. Advisers said the state program’s rate (about 2.24% in the presentation) could save roughly $1.8 million compared with an estimated market rate of about 4.57% and that payments on the $9.985 million package would be roughly $620,000 a year over 20 years if the city accepts the financing.

Stifel Public Finance told the council the award was granted in December but clarified that the council has not yet entered into any loan agreement. “This council is not entered into a loan for this water project,” the Stifel representative said during the presentation, adding the next steps would include formal council approvals if the city chooses to proceed.

Bond counsel described how the TWDB Clean Water State Revolving Fund operates and why many Texas cities use certificates of obligation (COs) to “evidence” the state loan. “The Clean Water State Revolving Fund is one of several financial assistance programs… It is an extremely competitive process,” bond counsel said, adding that TWDB requires documentation that the city has issued evidence of the award before finalizing the loan.

Key numbers and trade-offs - TWDB award: up to $9,985,000 (award announced Dec. 17, 2024) - Estimated annual payment: about $620,000 over 20 years (presenter estimate) - TWDB estimated available utility revenue for debt service: roughly $1.5 million per year - Estimated interest comparison: TWDB ~2.24%; municipal bond market estimate cited ~4.57% (presenter estimate) - City’s outstanding general obligation and other debt: presenter listed about $25 million remaining on prior issuances (originally ~$33.5M at issuance) - City credit rating cited: AA– (Standard & Poor’s)

Advisers said the TWDB loan would normally be repaid from the water and sewer utility revenues, not from a property tax increase. They explained the CO mechanism — a CO is issued and pledged for repayment but the city typically pays debt service from utility revenues so ratepayers carry the cost rather than property taxpayers bearing it directly. Bond counsel noted using COs for TWDB loans often reduces costs because it avoids certain reserve requirements and revenue covenants that pure revenue bonds can carry.

Council members asked how accepting the TWDB loan would affect utility rates and the city budget. Stifel and city staff said that based on recent financials the utility fund could service the loan without an immediate rate increase, while noting that the available revenue figure can vary year to year depending on one-time capital spending and other budget decisions.

“Based on your past year’s budget, you actually have room within the current levels to be able to take on this project,” the Stifel representative said. Councilmember James Ross pressed for clarity; Stifel and staff explained that some years show net system revenue available for debt service and other years are tighter depending on capital spending.

Advisers also discussed policy options for funding other capital needs: holding the city’s interest & sinking (I&S) tax rate steady could free up capacity over time as the tax base grows; a 5-cent I&S increase was presented as a scenario that could support roughly $19.5 million in projects, while a 10-cent increase could support roughly $37 million (presenter scenarios). The presentation included homeowner-impact examples: the staff estimate for a 5-cent increase was about $9.34 per month on a $224,000 home, and about $18.67 per month for a 10-cent increase on the same assumed value.

Process and timing Advisers said the TWDB award requires follow-up steps and documentation and emphasized the city must decide whether to accept the financing. TWDB’s funding cycle imposes a practical deadline for completing work: the presenters said the state expects the financing to be closed and the project under contract by Dec. 31, 2025, if the city accepts the award.

Council reaction and next steps Council members described the project as important to address aging infrastructure and water loss. Several members asked for a workshop so the council, staff and the consultants could review project scope, the loan terms, and the impact on rates and the utility fund in more detail — a workshop was discussed as the next step.

No formal motion or vote to accept the TWDB loan was taken at the meeting. Presenters repeatedly reminded the council that receiving the TWDB award does not commit the city to accept the loan: bond counsel said the award is an offer of financial assistance that the city must formally accept and document if it chooses to proceed.

Ending note City staff and advisers framed the TWDB award as a low-cost option to help bring utility infrastructure projects forward now rather than delaying work, while highlighting that the council must still weigh trade-offs including project scope, timing, repayment source and whether to use COs, bonds or other financing strategies.