Council approves annual bonds, approves annexation near Big Divide

By LYNETTE SOWELL
Cove Leader-Press 

The Copperas Cove city council approved the issuance of the city’s 2018 certificate of obligation bonds totaling $9.91 million, but not after some discussion with Garry Kimball, a representative of Specialized Public Finance at its Tuesday night meeting. 
The vote was not unanimous, with place 2 councilman James Pierce Jr. voting against the bond issuance due to inclusion of funding the design for the Business 190 median design.
The 2018 bonds will also fund a number of projects that will be repaid by taxes, water/sewer, solid waste, golf course and court technology funds. The rate is 3.11 percent for the 20-year notes, Kimble said. 
Kimball told the council that a total of nine bids came in for the city’s bond funding this year, with the city holding onto its AA bond rating from Standard & Poor’s, making it a “highly rated” city for loan funding. 
“This borrowing is not anticipated to result in a tax increase,” Kimball said “The city does amortize a significant amount of principal every year on bonds previously issued. Last year, you paid off $5 million worth of principal and this year you’ll pay off more than $6 million worth of principal, so we’re layering in the bonds that were selling tonight against those other bonds that are rolling off the balance sheet.” 
Kimball said the city’s rating reflects “very strong management, strong budgetary performance, very strong budget flexibility, very strong liquidity, and a very weak liability position.” 
Where the funding of the Business 190 median design is concerned, Kimble said that a “covenant” has been written into the funding agreement that the design funding can be used toward “transportation projects,” therefore it is not limited to the Business 19 median design alone and gives the city flexibility for using those funds.
Councilman Marc Payne asked what would happen if the city failed to pay off any of its debts. 
“It says that the city has never defaulted on a payment or outstanding debt obligation. You’ve stated we’re paying back 5-6 million a year, well, it seems like we’re borrowing 10 million a year or every other year. I notice that our balance is going up, from $77 million to $84 million. How are we not to feel uneasy about paying this back?”
Kimball said the city’s tax base continues to grow, so the city has a positive trend relative to the growth and tax base, and has also grown where taxes and utilities are concerned, to pay the debt issued. 
Payne said that property valuations have not gone up as high as in past years, and some values have gone down and he was concerned about what happens if the city “gets in a bind” and defaults, and if that would affect citizens. 
“If you do, it does,” Kimball said. “But you haven’t defaulted and there is nothing that I have seen, looking at all of the city’s past audits, looking at your forward-looking budget, looking at all the existing bonds that you have on your balance sheet and looking at how quickly they amortize, to suggest to me that you’re anything close to default.” 
Councilman Dan Yancey asked if the firm could provide a report that would show a more balanced approach to debt issuance for future years, to see if the city could handle some projects without debt issuance. Kimball said it was something they could work on. 
Payne said he would prefer to see if the city could essentially save up for the things it wanted to do.
“We all want nice things, and we hate to put things off for a long period of time. I could see saving money for the things that we want to put in, and borrowing money for emergencies, things that break down, things we know have to be done, not just borrowing money to put in nice things we would like to have now.”
Kimball said that Copperas Cove’s concerns are not so different from other cities, and his firm has over 400 municipal clients across the state. “Borrowing is never easy. It’s something that’s always taken” 
“You can be at one end of the spectrum and say, ‘We’re going to cash fund everything,’ but your tax rate would probably have to triple in order to do that, and improve your streets, do the utility improvements you need to do, and do that without debt. It would penalize current residents with high tax rates, and benefit residents 10 years from now.”
During Tuesday night’s workshop, the city council heard an update on the city’s budget planning from interim city manager Ryan Haverlah. 
Haverlah noted that the council’s budget priorities, which it previously gave as direction to Haverlah at an April planning workshop, to include a 1.5 percent cost of living adjustment for city employees, market adjustments to 95 percent for public safety employees, and including all positions requested in city departments. With all those requests, the general fund would have been more than $1.9 million under the ideal fund balance. 
Haverlah said that the city has had strong sales tax increases ranging from 9 percent to 16 percent over the last eight months, whereas historically for budget planning the city would anticipate around a 3 percent increase in sales tax. So, they are now planning for a 5.5 percent increased based on recent increases, to the tune of $330,000 increase in revenue. 
Making those adjustments puts the city’s general fund budget planning within compliance of the city’s charter and the council’s budget policy, by greater than $851,000, and the general fund operating deficit dropping to $850,000. Haverlah called it a good start, and said the city can always reduce expenditures, but to increase expenditures it must increase revenues or reduce expenditures elsewhere in the budget. 
Haverlah told the council they will see the city’s proposed operating budget for the 2018-2019 fiscal year at the July 3 meeting. 
Later, during the meeting when there was a public hearing for an amendment to the current 2017-2018 budget, Haverlah made note of several points. Overall, the general fund’s revenues are increasing by $265,240, and a number of department expenditures have overall decreased by $323,683. Also, the water and sewer fund for the current year has had a decrease in revenues by $160,872 overall for the fiscal year. As part of that revenue decrease, the senior citizen water discount has amounted to $336,683, offset by an expenditure decrease of $181,188. In the Solid Waste Fund, revenue adjustments amount to $242,846 in lost revenue.
The council voted unanimously on Tuesday to approve the annexation of 73.864 acres of currently undeveloped land that is planned for future single-family home construction, east of Big Divide and north of Taylor Creek Elementary School.