Commerce council opts to finance urgent wastewater plant repairs with certificates of obligation, rejects state loan

Commerce — The City of Commerce council voted Feb. 18 to pursue locally issued certificates of obligation to fund a phased rehabilitation of the city’s aging wastewater treatment plant and approved an engineering design phase, after hearings and a presentation by the city’s financial advisor and staff.

City Manager Lisonbee told the council the plant — which the city estimates can treat about 1 million gallons per day in current condition though its design capacity is 2 million gallons per day — has repeated capacity and equipment failures and a TCEQ (Texas Commission on Environmental Quality) notice tied to screening equipment. Lisonbee said the plant floods during major rains because the stormwater storage pond’s liner is compromised and the city has been forced to use the plant for storage.

The most immediate council actions were a motion not to pursue a loan application with the Texas Water Development Board (TWDB) and approval of a phase‑2 engineering amendment to an investment‑grade audit agreement with Schneider Electric to complete project design and construction documents.

Why it matters: Lisonbee and the city’s financial adviser presented three funding scenarios that vary by timing, borrowing size and potential subsidy. Staff said delays tied to pursuing TWDB funding could add roughly 9–12 months to the project timeline, risk requiring rework under the board’s procurement rules, and increase total construction costs by an estimated amount staff described qualitatively. Council accepted staff’s recommendation to stage borrowing — $2 million in the current fiscal year and $6 million in fiscal 2026 for construction — and to proceed with design work so construction can start in fiscal 2026.

What the council voted and approved - Motion not to pursue TWDB application: Councilmember motioned and seconded a motion declining to submit the city’s Project Information Form (PIF) to the TWDB; the motion passed by voice vote. The agenda item would have required a PIF submission by March 7 to be considered in the board’s intended‑use plan this year. - Phase‑2 engineering/design approval: Council approved Amendment 1 to the investment‑grade audit agreement with Schneider Electric to perform engineering and design for the wastewater plant rehabilitation at a not‑to‑exceed amount of $690,000. Motion carried by voice vote.

Funding scenarios and rate impacts Hilltop Securities, the city’s financial advisor, laid out three options: (1) the city issues certificates of obligation in the open market (competitive sale) and retains flexibility over amortization; (2) the city seeks TWDB financing (longer process, lower interest rate and possible subsidy but restricted amortization and procurement requirements); and (3) a hybrid of the two approaches.

Under the open‑market scenario for $6 million of construction, Hilltop estimated an incremental annual principal‑and‑interest cost of about $313,000 (assumed 25‑year term, illustrative 4.51% interest). Lisonbee outlined a two‑stage plan: issue $2 million in the current fiscal year for immediate stormwater/initial design work, and issue $6 million in fiscal 2026 for construction.

Staff estimated the bill impact for an average residential customer using 4,000 gallons per month would be about $2 per month in year one (the $2 million issuance) and an additional $4 per month in year two when the larger issuance occurs — a roughly $6 per month increase in aggregate. The city calculated that total annual water and sewer costs for that household would rise from about $960 to about $1,032 per year, or from 2.32% to 2.49% of the city’s median household income of $41,382; Lisonbee noted that both figures remain below the U.S. EPA small‑community affordability guideline of 3%.

Scope of the repair work and risks Lisonbee described three overlapping problem areas: (1) an immediate non‑compliant screening system already under design (about $1 million already issued and on hand); (2) the green‑box portion of the plant — aeration basins, sludge handling and associated pumps — estimated at roughly $6 million in construction; and (3) rehabilitation of an off‑site lined pond used for stormwater retention (the liner is compromised by roots), which staff said must be returned to service to stop repeated flooding of the plant and to restore collection‑system capacity.

‘‘If we don't do this project, the plant's going to fall apart and fail,’’ Lisonbee said, urging the council not to delay design and construction. City staff and Hilltop warned that applying to TWDB could delay engineering and expose prior design work to reprocurement rules, which in one example of a different project had required the city to redo earlier engineering at additional cost.

Next steps and communications Council approved design funding and directed staff to proceed with engineering so construction can begin in fiscal 2026. Staff said they will run a community communications campaign — including town halls and budget outreach — to explain the need for work and the expected changes to utility bills. Lisonbee said that because the plant’s current condition restricts growth and risks regulatory enforcement, staff believe staging the work now is preferable to delaying for the chance of slightly lower interest costs.

Votes at a glance (wastewater items) - TWDB application: Motion to not submit PIF to TWDB — outcome: approved by voice vote; mover/second not specified in the record. - Schneider Electric Amendment 1 (Phase 2 design): Motion to approve amendment not to exceed $690,000 — outcome: approved by voice vote; mover/second not specified in the record.

What was not decided tonight Council did not formally adopt a final borrowing ordinance or set exact interest or amortization terms for certificates of obligation; those actions would occur later if the city moves to market. Council did not approve any TWDB application paperwork.

Background and context Staff said the plant is decades old, with some equipment original to the facility; average dry‑weather influent is roughly 600,000–700,000 gallons per day, but the plant can see significantly higher flows during rain events that have overwhelmed capacity because the off‑site storage pond cannot be used. The engineering estimate for soft costs on the green‑box portion is approximately $689,000, which informed the recommended $690,000 design authorization.

The council’s actions make it more likely the city will issue local certificates of obligation in two stages — $2 million this fiscal year to address stormwater retention and preconstruction needs and $6 million in fiscal 2026 for construction — and to begin procurement for engineering and construction documents.

Council members and staff said they expect to return with specific borrowing documents and a timetable for sale and a community outreach plan before any bonds are sold.