SAN BENITO — A $9 million state-mandated sewer system overhaul won’t drive up property taxes this year, officials said.

But some of the Rio Grande Valley’s highest water rates might be climbing as early as next year.

Earlier this week, city commissioners unanimously voted to borrow $9 million through the sale of certificates of obligation to fund a state-mandated sewer system upgrade as the clock ticks toward the project’s March 2023 deadline.

For years, the Texas Commission on Environmental Quality has warned the city faces severe fines and corrective action if it fails to complete the project by the deadline.

“We have been kicking the can down the street,” City Manager Manuel De La Rosa told commissioners during the meeting Tuesday. “We’re at a deadline. It is my recommendation we don’t delay this any further.”

For years, officials have braced for the project to force the city’s 72-cent property tax rate to climb by as much as three cents.

However, Don Gonzalez, the city’s financial director, presented a finance plan he said won’t force a tax hike.

“The tax rate is going to stay the same,” De La Rosa told commissioners.

But officials might consider a water rate hike as early as next year.

“If there would be any (increase) it could be in the water and that would be at a future date,” De La Rosa told commissioners.

“I cannot tell you what the water rates will look like in the future,” he said. “I can’t tell you what the 2021-2022 budget is going to look like or (what) those water rates are going to look like.”

Refinancing bonds at low interest rates

During the meeting, Gonzalez, with Estrada Hinojosa Investment Bankers in San Antonio, told commissioners the bonds will be sold at an interest rate of about 2.68 percent.

“We’re at 99-percent lows of where interest rates have been,” Gonzalez told commissioners. “It’s about as good a time as you can possibly anticipate to borrow money. Things have definitely turned out for the benefit of the city of San Benito to be borrowing money at this time.”

As part of the finance plan aimed at saving about $500,000, the city is refinancing about $9.9 million in bonds dating back to 2011 and 2015, now carrying interest rates ranging from 2.42 percent to about 4 percent.

“We’re going to take the old debt and refinance it at a lower interest rate to save the city some money,” Gonzalez said.

Meanwhile, he said, the city’s Economic Development Corporation will earmark $137,000 to help pay off debt as it completes its annual payments on the city’s 20-year-old police station.

The project

As part of the overall $9 million project, $7 million will fund construction of six sewer lift stations to comply with the TCEQ order, $700,000 will fund the purchase of a fire truck and other equipment and $1 million will help fund other water and sewer projects. The bond package also includes the purchase of a $300,000 excavator.

Last year, commissioners borrowed $1.5 million through the sale of certificates of obligation to fund the planning and design phase of the project to rebuild the sewer lift stations.

But last year commissioners also voted down a proposed $6.7 million project to fund the sewer system overhaul.

Background

For about 10 years, the multimillion-dollar sewer system overhaul has loomed over one of Texas’ poorest cities.

As part of a 2012 agreement, the Texas Commission on Environmental Quality is requiring the city upgrade its sewer system by March 2023 or face severe fines and corrective action as a result of sewer spills about 10 years ago

In October 2012, the city entered into an agreement with TCEQ to participate in its Sanitary Sewer Overflow Initiative program following a series of sewage spills near the Arroyo Colorado totaling 49,000 gallons from November 2009 to January 2010.

As part of an agreement, the state waived penalties, ordering the city to upgrade its sewer system by March 2023 or face severe fines and corrective action.