Brownsville staff urges $150 million debt sale to protect 2026 capital program if state caps COs

Deputy City Manager and Chief Financial Officer Alan Guard told the City Commission on Aug. 19 that proposed state legislation likely to cap certificates of obligation (COs) would force the city to change how it schedules its 2026 capital-improvement program (CIP). Guard recommended selling $150 million in debt now under a “scenario B” so the city can match time-sensitive grants and complete high-priority projects.

Guard said the bill under consideration in the Texas Legislature would cap CO issuances at 20% of prior-year property tax revenue, which for Brownsville would amount to about $14,800,000 this year — far short of the $45 million to $50 million per year the city had planned. “It’s very difficult for us to start building a $70,000,000 building when we know we’re only gonna get $15,000,000 a year,” Guard said.

The proposal affects a five-year CIP the commission approved in 2024 that included design and construction funding for a public safety complex, runway reconstruction, hybrid bus purchases, street reconstruction (including Fourteenth Street, Coffeeport Road and Old Alice), trail and park projects, and downtown renovations. Guard described three pressures that prompted the revised timing: the proposed CO cap, inflation and construction cost escalation, and new, award-winning TxDOT grants totaling about $28 million that require roughly $5.6 million in local matching funds and prompt earlier work on design and right-of-way.

Under Guard’s “scenario A” (no legislative cap), the city would continue its previously planned annual CO issuance of about $45 million to $50 million. Under “scenario B” (assumes the cap will pass), staff’s recommendation is to sell $150 million now, apply roughly $70 million of that to the public safety complex, accelerate matches for TxDOT and FAA grants, and then sell roughly $13 million–$15 million per year in subsequent years to continue the program. Guard said the accelerated sale would let the city secure grant matches and avoid multiyear inflation exposure on large projects. “We would be able to fund the majority of the program. We’d be able to get the public safety facility done,” he said.

Guard said the public-safety project includes police department space, the emergency operations center and fire administration; the airport projects and runway funding remain unchanged in both scenarios. He said some less urgent projects — notably replacement of Fire Stations 1 and 2 — would likely be pushed beyond the five-year horizon under the constrained scenario. Guard also raised traffic-management projects won from TxDOT that include signal synchronization and noted the city’s match will be larger than construction-only grant dollars because the city must pay engineering and design costs.

Commissioners asked about timing, local tax-rate impacts and construction-price risk. Guard said Moody’s affirmed the city’s AA3 stable rating and that the modeled local interest-and-sinking rate (I&S) would not need an increase this year but could rise “about 1–2¢ next year,” depending on assessed-value growth. He added the city had already sold about $6 million for early design work on the public-safety complex and planned to hire a construction manager at risk at the next meeting.

Why it matters: the city is balancing near-term grant-driven construction opportunities against new state-level limits that would constrain Brownsville’s traditional five-year borrowing plan. Selling more debt now would increase near-term debt service and require higher annual I&S in later years, but would allow essential projects and grant-funded work to proceed on schedule.

What’s next: staff said it will schedule a special work session focused on streets and drainage; staff proposed a Tuesday 4 p.m. meeting to drill into road priorities and timing. Guard also asked the commission to weigh the two scenarios and gave a nod to scheduling a separate, more detailed CIP workshop.