Buda, Kyle city councils hear update on Alliance Regional Water Authority project

At meetings on Dec. 5 and Dec. 19, Buda and Kyle city councils authorized funding of $2.34 million and $12.96 million, respectively, for completion of the Alliance Regional Water Authority project.

In addition to other sponsors. the cities of Kyle and Buda have regional water supply contracts with ARWA that allow the authority to finance, construct, maintain and operate a water supply project in a manner that will allow delivery of water to sponsors on a regional basis.

Previously, at meetings on Nov. 14 and Nov. 28, Kyle and Buda city councils heard updates on the project from ARWA Executive Director Graham Moore.

The Phase 1B funding includes project shares that were set by the water supply agreement, with Buda's share of the total project cost approved at 5.08%. Kyle’s share is 28.17%.

According to Moore, there is a total shortage of $46 million for the project. This includes construction for segment C of the pipeline, the north inline elevated storage tank and an administrative facility.

“We’ve got a shortage of $46 million for the entire program as a result of, really, two different components. One is just construction costs have increased from our initial estimates in 2017. And then the other significant component is our land acquisition cost. As we’ve gotten easements for all of our pipelines through the area, land prices have risen significantly from when they were initially estimated, particularly after 2020,” Moore explained.

“Historically, we have always utilized the State Water Implementation Fund of Texas [SWIFT], through the water development board, for our funding. We still hope to do that again for this. However, the one challenge that I see with that fund is that it only becomes available one time per year,” said Moore.

Based on needs in the region and inflation pushing costs higher, Moore emphasized that there is a need to move the work forward more quickly than SWIFT funds allow. Therefore, Moore requested approval for the issuance of Bond Anticipation Notes (BANs) from each project sponsor as a short-term funding option until a SWIFT loan can be obtained. The SWIFT loan is expected to be funded in November 2024.

During the initial presentations to council, Moore explained that the current water supply agreements do not specifically allow for the use of BANs, which meant that contract amendments would also be required.

Based on the expected draw from the system, the portion of the cost increase that the city of Kyle is responsible for is 28.17%, or $12,958,200. During the one-year term of the BAN, it will accrue interest in the amount of $563,032.

The city of Buda is responsible for its 5.08%, or $2,336,800, share of the shortage, which will accrue interest in the amount of $101,534 during the BAN term.

Moore explained that ARWA is hoping to roll the interest cost into the total SWIFT loan, but if that is not approved, it will be due at the closing of the loan.

“As far as major project bonds — it’s one thing if construction costs change — but as far as major items, are these the last items? Or are there more major items?” Buda City Council member Evan Ture asked.

Moore confirmed that these are the last three projects that were included in the initial Phase 1B program. However, there are future plans for expansions 1C and 1D.

“I’m just having a really hard time here. Like, it sounds like there’s some semblance of shared responsibility for the position that we’re in right now, but — correct me if I’m wrong — you guys are the experts on building out pipelines,” Kyle City Council member Bear Heiser questioned. “Why wasn’t this anticipated? Because we’re in this position now; you guys have already been delayed, it seems like years from my understanding, and now there’s more delays. You need more money.”

In response, Moore said, “Ultimately, it is my responsibility to get this system built. And so, I am the one responsible … It’s unfortunate that we’re in the situation where we are, but we are trying to identify ways that continue moving the project forward so we can get the infrastructure built and be able to deliver the water as quickly as we can."

“I think, you know, [Moore] is right. No one’s happy to have the cost, but it’s critical infrastructure that we need to have for the future of the city,” said Bryan Langley, Kyle city manager.

Both city councils passed the contract amendment and the issuance of the BANs unanimously at their respective December meetings.

Currently, neither city expects an increase in water rates for Fiscal Year 2024 due to the cost increase.

Kyle City Council met again at press time on Tuesday, Jan. 2. Buda City Council will meet again Wednesday, Jan. 3.