Get Full Government Meeting Transcripts, Videos, & Alerts Forever!
Get email alerts on the Water Financing topic
No spam. Unsubscribe anytime.
Mercedes approves drinking-water financing package with roughly $7.23M in principal forgiveness
Summary
The Mercedes City Commission approved a drinking-water financing plan that pairs an $11.78 million loan with about $7.23 million in principal forgiveness, funding roughly $19 million in plant and distribution upgrades; the utility will carry debt service and staff will hold a workshop to detail projects.
The Mercedes City Commission on June 16 advanced a financing package to repair and upgrade the city’s drinking-water system that advisers said pairs an $11.78 million loan with approximately $7,234,647 in principal forgiveness, resulting in an estimated $19 million project.
Financial advisers told commissioners the package uses a subsidized loan at roughly 2.8% over 30 years and that the principal-forgiveness portion significantly reduces the city’s borrowing burden. "If you had a mortgage and someone took care of 40% of it, would you go forward? I think so," said a city financial adviser, describing the combination of loan and forgiveness as a strong deal for Mercedes.
Advisers said the city’s net utility revenues will be the primary source of repayment and that, as presented, the transaction would not increase the city’s ad valorem tax rate; the pro forma assumes current rate actions and projects coverage ratios into fiscal 2027 that require ongoing rate monitoring. Matt Leuon, the adviser who presented the coverage analysis, said the subsidized structure produces substantial lifetime savings compared with market borrowing at higher rates.
Commissioners also heard a summary of the types of repairs the funds will cover: upgrades to elevated-water storage and treatment, repairs and replacement at the wastewater plant’s UV system and racetrack clarifier, restoration of bypassed lift stations, and other targeted system deficiencies cited in the state application. Staff said a follow-up workshop will itemize each project and provide a prioritized, line-item scope.
The commission approved an ordinance related to issuance of certificates to implement the financing and then approved Resolution 26-32 accepting the principal-forgiveness agreement, with the record listing the forgiveness amount as $7,234,647. City officials said, if approved, the transaction is expected to close with the state board in late July, and construction and procurement will follow scheduled project planning. The city will return to the commission with a detailed workshop agenda and the precise implementation timeline.
Next steps: staff will present the line-item project list at a public workshop, confirm final debt-service modeling, and proceed to closing if financing terms are finalized.
