HUTTO – The city has authorized the sale of $12 million in bonds to build a road running through the Hutto Megasite parallel to U.S. 79. The funds are part of the amount approved in the 2018 bond election.
“The new debt is actually wrapped around the existing debt, and the combined new debt and existing debt will not result in an I&S (interest and sinking) tax increase,” said Jim Sabonis, financial advisor with Hilltop Securities.
Sabonis said the city’s AA bond rating remained unchanged through a rating process assessment, but its management rating improved.
“The financial management assessment of the city was increased from ‘Standard’ to ‘Good,’ indicating solid improvement in the policies and procedures of the city,” he said.
Sabonis also said the city is on track to be able to drop the I&S tax rate next year or keep it the same and have extra funding capacity.
“The debt structure for the city is in a more conventional declining scenario to put the city in good position in the future to fund growth or to work on the ad valorem tax rate,” the advisor told council. The road, currently called E/W Spine Road, will provide connectivity for Titan Development’s planned industrial park within the Megasite and is needed to attract and retain business to the site, according to city documents.
The Megasite spans 79 from FM 3349 to County Road 132. City spokesperson Allison Strupeck said E/W Spine Road will enter well into the Megasite at FM 3349 but will not continue all the way through to 132 within the current scope.
Hutto Economic Development Corporation Director Bob Farley said the road will ultimately be paid for by the EDC.
“The city issued the bonds because it’s cheaper for the city to borrow and pledge ad valorem taxes,” he said. Farley explained that bonds secured and paid by property taxes have lower costs, and the EDC does not collect property taxes.
“We (the EDC) will repay from other sources as we go. It’s not atypical at all for cities to use their cheapest funding source to get money issued and then retire the debt with other funding sources. That happens quite a bit.”
The bonds will carry a 4.89604% interest rate. According to City officials, $75 million of the $125 million in voter-approved bonds remained unissued before the Spine Road bond purchase.
Construction of the road should begin in 2024.
