By Karen Gleason
The 830 Times
Del Rio City Council members reviewed the city’s overall debt during a recent meeting, with at least one council member expressing concern about millions of dollars in additional borrowing expected in the coming months.
Tony Jaso of Estrada Hinojosa, the city’s financial advisor, traveled from San Antonio on March 10 to present an overview of the city’s debt and discuss potential opportunities to refinance some of that debt.
Jaso told council members the figures represented a snapshot of the city’s debt as of the end of February.
“As you can see, in total par amount of bonds that are outstanding for the city, we currently have $114,023,580,” Jaso said. “That includes the debt that we’ve been working on for infrastructure projects for the utilities system, and so this is really everything as to where we are as of the end of February.”
Jaso said some of the debt will be reduced this year when the city makes its principal payment on June 1.
He said $46,486,898 of the debt is supported by property taxes, with the remainder supported by revenues from the city’s enterprise funds.
“Typically, everything that we’ve issued has carried the pledge of tax and revenues,” Jaso said. “So, if we want to think of it this way, it’s a loan we’re taking out offering two sources of collateral — the ability to tax and the revenues of the enterprise system.”
Jaso said the city adopted the dual-collateral strategy decades ago when it faced financial challenges and had a lower-than-investment-grade bond rating.
“Fast-forward, as we sit here today, the city enjoys a strong investment-grade rating of AA-, Aa3 from Moody’s, Standard & Poor’s and Fitch,” Jaso said. “That, of course, is beneficial because it offers the city lower rates when you do have to go out into the market to borrow money.”
Councilman J.P. Sanchez asked how much additional debt the city may take on for upcoming sewer and water projects.
“I do know there was a contemplated amount, and I believe it was for the sewer system and estimated to be about $29 million,” Jaso said.
Sanchez said he was concerned about the city’s long-term financial position.
“What I’m trying to find out is what is this going to tap out at?” Sanchez said. “This tells me what we owe right now, but what worries me is what we’re about to get ourselves into.”
Jaso said the city must balance infrastructure needs with its ability to repay debt, noting advisors typically recommend maintaining at least 1.25 times coverage of annual debt payments for cities with AA ratings.
Sanchez also questioned whether the city would be able to maintain its current bond rating as debt increases.
“That’s exactly right,” Jaso said, adding that recent rate studies included projections tied to future debt.
Councilwoman Ernestina “Tina” Martinez asked about total interest costs associated with the city’s debt.
Jaso said interest totals $42,228,312, bringing the city’s total debt service — principal and interest — to $156,251,892.99.
Mayor Al Arreola asked how far back some of the city’s certificates of obligation extend. Jaso said some date to 2012 and noted the city currently has 24 outstanding loans.
Arreola also confirmed that $64,211,000 in utility system debt includes approximately $17 million in recently issued infrastructure-related debt.
Councilwoman Carmen Gutierrez questioned the increase in total debt from $91.3 million to $114 million over a five-month period.
Jaso said the increase was primarily tied to new debt issued for utility system projects, including funding from the Texas Water Development Board and a $17 million issuance through the Texas Military Preparedness Commission.
Gutierrez also asked how much the city’s debt would decrease in the coming fiscal year.
Jaso said the city is expected to pay down $8,536,706.81 in principal in fiscal 2026, with total debt service payments of $10,796,743.54.
“One of the things that the rating agencies note about the city — and this is actually a credit positive — is that you all amortize your debt fairly quickly,” Jaso said. “Within 10 years, I think, you will have amortized 60 percent of your portfolio.”
Gutierrez also discussed a potential $15 million grant tied to House Bill 500 for North Bedell water system improvements, which would require a 10 percent local match.
Interim City Manager Manuel Chavez said the city would need to provide approximately $1.5 million.
Gutierrez urged city staff to make detailed debt information available to the public and to include total debt, including interest, to provide a clearer picture to taxpayers.
She also asked that future project presentations include how much individual projects add to the city’s overall debt.
Jaso said the city may have opportunities in the coming months to refinance some of its debt, noting approximately $9.51 million in outstanding debt could be considered for refinancing.
He said he expects to return in mid-May to discuss interest rates and refinancing options in more detail.
Chavez reminded council members that during their Feb. 24 meeting, Assistant Finance Director Roxy Soto presented information on additional funding needs, including more than $2 million for improvements at the Silverlake Wastewater Treatment Plant and about $23 million for the northside sewer trunkline, for a total of approximately $25 million.
The writer can be reached at delriomagnoliafan@gmail.com.
