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Council hears lease–leaseback plan to finance $7.1M landfill stormwater project
Summary
City staff and outside advisers outlined a lease–leaseback borrowing plan to generate roughly $7.1 million to reimburse the water fund and fund stormwater mitigation at the city landfill; staff said solid-waste revenues alone are unlikely to support a revenue bond and asked council for direction to refine terms and return with a rate‑study spreadsheet.
City staff presented a proposal on Jan. 20 for a lease–leaseback financing to produce about $7.1 million in net proceeds for a landfill stormwater mitigation project, saying the solid‑waste fund does not generate enough net revenue to support a standalone revenue bond. Bob Cross, management services manager, introduced the plan and said staff evaluated internal loans and found no viable option that would avoid “irreparable strain” on existing funds.
Scott Ferguson of Jones Hall, bond counsel, told the council the lease–leaseback structure is a common tool used by local agencies to finance long‑term capital projects. He described three documents involved — a site lease, a lease agreement and an assignment of lease payments to a lender — and explained the legal theory that the structure relies on an annual appropriation rather than a constitutional debt limit.
Dan Cox, a municipal advisor, said staff initially hoped to pursue a revenue bond but the wastewater and solid‑waste rate increases approved earlier did not produce the net revenues needed to persuade investors. “We plan to come back for approval of the financing, and there will be more specifics as to the general‑fund backstop,” Cox said, adding staff is seeking bank proposals and expects a roughly 15‑year term with estimated annual debt service of about $700,000.
Several council members pressed staff for additional financial modeling. Council member Starbuck asked how many years the proposed term would run; Dan Cox said the borrowing size would be approximately $7.3 million including issuance costs, with a 15‑year term. Council member Ball asked for a clearer explanation of the “general fund backstop” and asked staff to present spreadsheets comparing the impact of carrying the loan on different funds. Mayor James Mosby and other members said they want the rate‑study results and a detailed spreadsheet before committing to the structure.
Staff said federal tax‑exempt financing rules create a June deadline for issuing tax‑exempt obligations tied to when project expenditures were made, which is why staff is seeking a spring financing timeline. Council did not take formal action; staff were directed to return with a detailed rate‑study analysis and cash‑flow worksheets for the water and solid‑waste funds to show the projected effect of the proposed transaction.
The council will review the financing terms and the consultant’s recommendations at a future meeting before any final authorization.
