Friendswood council approves schedule for $20.5 million water and sewer revenue bonds

Friendswood City Council on Monday authorized the schedule for a Series 2025 Water and Sewer System Revenue bond issue that staff and the city's financial adviser said will provide about $20.5 million for water and wastewater projects.

City Manager Murad Kabiri introduced the item and BOK Financial Securities representative John Robock presented market context and the financing plan, saying the proposed bonds would produce $20,500,000 in project proceeds and establish a required reserve fund of about $1,400,000.

Robock said municipal market volatility has affected rates and that the city’s bonds would sell as revenue bonds; he described a schedule of events that includes rating calls and a sale report to council on March 3 and a anticipated closing March 27. “We’re gonna draft the first draft of document. We’re actually on the second draft right now,” Robock said.

Why now: Kabiri and Robock told council the city’s water and sewer working capital had dropped well below prior levels and that the city has existing contractual commitments — including work tied to the Southeast Water Purification Plant and the Blackhawk Wastewater Treatment Plant — and development-driven upsizing requirements. “If we don’t issue the debt, then we’re not able to complete those projects, and we may have a situation where our water sewer system would then start to degrade,” Kabiri said.

Council members asked whether the bonds were new money or a refunding; Robock and staff clarified the issuance is new debt to fund projects, not a refunding of the 2014 or 2016 general obligation refunding bonds. Staff also noted the city has previously adjusted utility rates to account for this planned issuance.

The council moved, seconded and voted to approve the schedule to proceed with the sale and related rating/diligence work; the motion passed unanimously (specific vote counts were not provided in the meeting record).

What happens next: staff and the city’s underwriter will complete rating calls and diligence, present sale results on March 3 for council approval, and—if approved—close the financing on March 27, at which point project funds and the required reserve will be available.

Clarifying details and context: Robock said the priced principal shown in the plan was $20,000,003.95, producing $20,500,000 in proceeds; the reserve fund requirement he cited was about $1,400,000. Staff said the last water/sewer bond issuance was in 2021 and the city had used working capital in intervening years instead of issuing new debt.

Ending: Council gave staff and the city’s financial advisers authority to proceed with rating calls and the sale schedule; staff will return with sale results for final council action.