By Andy Sevilla.
As several of Kyle’s water storage reservoirs advance in their “urgent” need for repairs, city leaders move forward with short-term financing for the tanks’ needed rehabilitation.
Four of the city’s fourteen water storage tanks were identified as needing “urgent” and “extensive” repairs, according to a 2012 study, including fixes to roof ventilation systems, metal fatigue, tank contamination preventatives, and re-coating, among many other problems.
As the city looks for dollars to help fund several projects around Kyle, council members approved seeking state help in the form of a loan to cover the expenses for the tanks’ rehabilitation. At the July 16 meeting, council approved the submittal of a $750,000 loan request from the Texas Water Development Board (TWDB), seeking $450,000 to rehabilitate the four water storage tanks, and $300,000 for water and wastewater system modeling software that would evaluate existing and future capabilities.
Now, acting on a recommendation by Kyle Finance Director Perwez Moheet, council members approved the retraction of the TWDB loan application, and instead will fund the water projects with tax notes.
Moheet told council members at their Jan. 21 meeting that city staff recommend submitting a loan application to the TWDB in July to provide the elected officials with alternative funding options. The city’s finance department included $2.2 million in tax notes in the fiscal year 2014 budget—which was approved in August—and in those tax notes staff included the $750,000 to cover expenses for water tank rehabilitation and system modeling.
If council members had not approved the $2.2 million in tax notes during budget deliberations last fall, city leaders still would have had the TWDB loan as a funding option.
Perwez told council members he favored the tax note over the TWDB loan primarily because the economic useful life of the water tank improvements range from seven to ten years.
“So it would be prudent on our part to match the useful life with the term of the financing instrument, whether it be a loan or tax notes” Moheet said. “And in this case, the tax notes match better the useful life of what we’re investing in. So you don’t have a 20-year loan financing something that’s only good for seven years.”
The TWDB loan was a 20-year loan with principal and interest payments due beginning the present fiscal year, according to the attached fiscal note. Moheet said a tax note could be paid off in seven years at an interest rate between 2.80 and 2.90 percent given the city’s credit rating. Moheet projected the TWDB loan to be at a 3.00 to 3.25 percent interest rate.
Also, Moheet noted, that the city has 14 total water storage tanks in their distribution system, and that the funding only provided fixes for four of them.
“If we use short-term financing – let’s say, for example, the tax notes – they will be paid off in seven years,” Moheet said. “So now we have an opportunity to implement a rehabilitation program for all our water reservoirs in our system.” He said every eight to ten year cycle, by the time the tax notes are paid off, the city can be ready to finance a new set of water tank improvements. “… That would be a great benefit to the city.”
Moheet also warned council members that the “paper intensive” TWDB loan program would be taxing to the limited staff in the city’s public works and finance departments, specifically when it came to the “rigorous” reporting and specification requirements.
But, he said not to cast off a potential TWDB loan for future projects. Moheet said “a perfect project” for the state agency funding would be the imminent expansion of the city’s wastewater project. Early estimates drive the cost of the expansion upwards of $4 million.
The four tanks identified as needing “urgent” and “extensive” repairs are: Rebel Road GST (ground storage tank) #1, Roland Lane EST (elevated storage tank), Well 3 Standpipe and Well 3 EST, according to the city’s July resolution. The water and wastewater system models are necessary for evaluation of the existing and future capabilities of the city’s water and wastewater systems, the resolution states.
The Rebel Road GST is one of three pumping systems the city has to access groundwater from the Edwards Aquifer. This tank is “key” to meeting peak summer demand and is “the single most important pumping structure we have to respond to emergency loss of surface water,” according to an Aug. 7, 2012 presentation by Jason Biemer, city utility coordinator.
The Roland Lane EST supports pressure and fire flow at the far south end of Kyle, and it has been identified as second in repair priority, following the Rebel Road GST, according to the presentation.
The Well 3 Standpipe and EST support approximately 30 percent of the water needs in the city’s northwest quadrant during the summer, the presentation states, adding that repairs should be made simultaneously to maximize cost effectiveness and minimize disruptions to operations.
