(Seguin) -- The city of Seguin is taking on some additional debt soon to help pay for some much needed improvements in the city. The city is working to secure $5.5 million through certificates of obligation. The money would primarily pay for some street improvements, but it also includes funding for engineering work on the expansion of the Walnut Springs Trail, repairs on existing fire station buildings, and the creation of an additional parking area for the Seguin Police Department.
Duane Westerman, of SAMCO Capital Markets, serves as the city's financial advisor. Westerman explained to the council the process needed to secure the financing.
"Certificates of obligation are one of the few methods that cities have to issue debt to fund capital projects. CO's as we call them are issued by the city and secured by your authority to levy a tax -- a property tax. The security of the taxing authority makes CO's a popular investment that is (highly) regarded, particularly with the city strong credit ratings of Double A by Standard and Poor's, and Double A by Fitch (Ratings), as relatively safe and provide an attractive low tax exempt borrowing rate," said Westerman.
Westerman says they expect there to be lots of interests in the CO's, particularly given the fact that the city's financial rating has again improved.
"Recently Standard and Poor's (Financial Services Company) upgraded your general obligation rating to Double A, and I want to congratulate you on that. That's been a lot of work from this council and some of the preceding councils to institute the policies and procedures and financial results and things that you have done over the last several years. So congratulations as you continue to move that rating upward," said Westerman.
The funds will require a tax increase. Westerman says it will likely be a one to two cent increase in the overall interest and sinking fund tax rate.
"Based on a range of assumptions that we've used, these certificates of obligation may require a property tax rate increase of one to two cents. If the interest rates and the taxable valuations come in -- if the interest rates come in lower and the valuations grow faster than what we've projected, we'd be on the low end of that range and maybe lower. If the opposite occurs, we're probably be closer to the two cents, but that I think is the absolute worse case (scenario)," said Westerman.
The list of road projects to be funded, at least in part by these funds, includes North King Street, Rudeloff Road Phase I, South Milam Street, North Milam Street, Fleming Drive, Nolte Street, and Martindale Road.