Converse council briefed on plan to sell certificates of obligation to fund roads, water projects

City of Converse officials on May 13 were briefed on plans to finance a package of street and utility projects with certificates of obligation and were advised to move quickly because pending state legislation could limit or end cities’ ability to use COs.

Interim city staff presented a list of proposed capital projects, engineering estimates and funding gaps, and noted recent bid results. Financial adviser Andrew Friedman of Samco Capital Markets explained how issuing COs would affect the city’s tax rate and recommended a timetable that would start with a council “notice of intention” resolution at the May 20 meeting, sale of COs on Aug. 5 and closing by Aug. 27 if the council decides to move forward.

The projects presented included Topperwine Road (Phase 1 and Phase 2 and an FM 1976 intersection realignment), Greenway Trail Phase 2, the RSV/VIP waterline replacement (low bid opened that morning at $3.6 million, rounded to $3.7 million in staff materials), right‑of‑way acquisition and construction management costs, and a proposed reopening or re‑drill of a Cimarron well as an alternative water supply. Staff said $2.5 million in ARPA funds are available toward the waterline, leaving an estimated $1.2 million funding gap for that item. The total funding gap the city would need to borrow was presented in two scenarios: roughly $17 million including all listed items and construction‑management consultant costs, or about $8.8–$10.4 million with selected exclusions and a 20% contingency.

Friedman said the city has capacity to borrow about $10 million from the general fund while keeping the current tax rate level under the assumptions used in his analysis. He said the utility fund has substantially more borrowing capacity—Samco’s pro forma indicated roughly $40 million of possible utility‑fund debt capacity—because the utility fund’s current debt service declines next fiscal year. Friedman estimated a 20‑year fixed rate in the neighborhood of 4.125%–4.25% at present market conditions, but cautioned rates could change by August.

Both staff and the adviser flagged an immediate reason to act: multiple bills in the Texas Legislature that night had proposals to limit or eliminate municipal access to COs or to cap maximum annual debt service to a percentage of tax levies, and any statutory changes would take effect Sept. 1, 2025. Friedman described House Bill 19 (as discussed at the meeting) and related proposals that would reduce cities’ debt capacity if enacted. Because of that timetable, staff recommended adopting a notice of intention at the council’s May 20 meeting so the city could sell COs before any law changes take effect.

Councilmembers and staff discussed using an in‑house construction‑management position instead of expensive outside construction‑management contracts to reduce borrowing needs, and asked for contingencies in project estimates; one councilmember suggested 20% contingencies because of rising materials and labor costs since pre‑COVID estimates. Staff also noted some funding sources are restricted (for example, housing finance corporation earnings and certain impact fees) and said legal rulings would be required before repurposing restricted funds for other projects.

No formal council vote was taken on May 13. The council signaled it would consider a formal notice of intention at its May 20 meeting and return in August to review competitive bids and, if acceptable, sell the COs. Financial advisers said the city’s Standard & Poor’s rating (double A minus) supports competitive bidding and generally produces lower interest costs.

Details on project estimates, bid results, and funding gaps were presented during the briefing; staff emphasized that specific dollar amounts were engineer estimates and that the council must instruct staff which projects to include in any notice of intention before borrowing proceeds.