Council authorizes staff to proceed on Port Aransas venue financing using 1.1 coverage ratio

The Port Aransas City Council voted to authorize city staff and consultants to proceed with the financing plan for the city’s new venue project using a 1.1 coverage ratio, following a presentation from Samco Capital Markets. The vote followed staff discussion of revenue assumptions and a request for conservative underwriting.

Samco analyst Jack McClaney walked council through conservative projections based on last year’s audited hotel‑motel revenues and noted that each one‑cent increase in the hotel tax yields roughly $1.6 million to the city. "2025 revenues were $11,369,000," McClaney said, and he told council that the two‑cent venue tax adopted by voters would produce about $3.25 million annually on last year’s collections if no growth is assumed. Mark McClaney, who introduced the firm’s presentation, said the analysis assumes no growth to remain conservative as the city prepares to place debt in the market.

The Samco presentation showed a range of borrowing scenarios. Under a $40 million issuance plan, the consultants recommended reserving roughly $2.5 million to cover a year of debt service in a severe downturn (for example, a hurricane year that sharply reduces hotel revenue). That reserve lowers the initial project fund available from $40 million to roughly $37 million, the firm said. The consultants also described a larger borrowing scenario that could expand project capacity while retaining coverage near the 1.1 target.

Council members questioned call provisions and the mechanics of pre‑funding or advancing maturities if revenues exceed projections. Samco noted typical market practice: bonds will be non‑callable for about 10 years to secure competitive pricing for insurers, and the city could prepay certain maturities later if revenues permit. Samco said they would work with a rating agency and prepare official statements ahead of a September pricing meeting; if market rates were unfavorable at sale, the firm said it would not recommend accepting bids.

Following discussion, a council member offered a motion authorizing city staff, Samco Capital Markets, bond counsel and city consultants to proceed with the finance plan for the Port Aransas venue project at a 1.1 coverage ratio. A second was made and the motion passed on roll call.

What happens next: Staff will engage rating agencies, finalize the official statement and return to council for formal issuance at a future meeting (Samco indicated September 17 as the target for pricing and a council vote to issue debt if market conditions are acceptable).