Finance adviser urges bigger reserves, recommends certificates of obligation to fund infrastructure

RBC Capital Markets presented a preliminary plan of finance to the Groves City Council on Nov. 24, 2025, recommending the city consider certificates of obligation (COs) to fund a package of near‑term capital projects including water‑meter replacement, wastewater improvements and sewer collection upgrades.

Dusty Trailer, managing director at RBC, said the city’s current ending general fund balance is roughly $4.2 million and recommended a long‑term target of about 180 days of operating reserves (approximately $6.5 million based on the presentation). He warned that the city is "underfunded" relative to that goal and outlined hurricane and disaster reserve needs tied to the city’s coastal exposure.

Debt capacity and vehicle selection: RBC reviewed the city’s outstanding bonds (three primary issues totaling about $10.4 million) and said declining near‑term debt service creates capacity for new financings. Trailer explained standard financing vehicles — general obligation bonds (voter approval required), revenue bonds, and certificates of obligation — and recommended COs for a mixed package of general and utility projects because they can be structured to draw on both revenue and tax backing.

Timing and process: RBC advised a notice‑of‑intent step followed by a 45‑day publication period before issuing COs, then a Texas Attorney General review (roughly 20–30 days). If council proceeds, the consultant said a sale could be timed for March or April with proceeds available soon after the AG review.

Project examples and sizing: the presentation referenced the Schneider Electric AMI meter proposal (~$5.7 million) and additional anticipated wastewater and collection projects (RBC cited ranges such as $10–12 million for wastewater improvements and roughly $3 million for sewer collection upgrades). Trailer discussed interest‑rate considerations and said long‑term municipal rates were likely to be near historic norms; he estimated aggregate all‑in borrowing costs for a 20‑year CO might be in the mid‑4% area depending on market conditions.

Council questions and next steps: council members asked how specific the notice of intent must be (RBC recommended broader language to preserve flexibility) and whether grant funds could be coupled with debt proceeds to reduce principal. Staff and RBC said combining grant and debt funding is a typical approach and that bond covenants should be written with flexibility for the planned package of projects.