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Council moves to make major water investments

Friday, April 22, 2016 by Jack Craver

City Council voted Thursday for the city to apply for nearly $190 million in loans as part of a plan to make major investments in local water infrastructure in the coming years.

The city will apply for a loan of roughly $86 million from the Texas Water Development Board in order to make improvements to the city’s two wastewater treatment plants, to build tens of thousands of additional feet of reclaimed main and to build a 4-million-gallon ground storage tank and pump station.

Additionally, it will apply for a roughly $80 million loan to cover the cost of putting in place a smart meter network.

Austin Water, the city-owned water utility, framed the two potential loans as an opportunity to get needed improvements in water infrastructure on the cheap, since the interest rates on the TWDB loans are lower than the rates the city is typically subjected to when it takes on debt. The city will spend $9.25 million less on interest over the seven-year term of that loan than it would if it borrowed the money by typical means, said Greg Meszaros, director of Austin Water.

“If we’re going to be investing in meters, now is time to at least consider moving to a more innovative, modern meter system,” he said. “It would be better to be first in line for low-cost loans.”

The two loans would have likely been approved without debate if not for the objections of Council Member Don Zimmerman, who trotted out his usual denunciations of city debt. He said that he regretted having to “connect the dots” for others but that “our bills are going to go up if we approve this additional debt.”

City Chief Financial Officer Elaine Hart noted that Council was being asked to approve the loan applications and that it would have to vote to approve the debt later on if the city’s application is approved by the Water Development Board.

That reasoning didn’t appeal to Zimmerman, who said that regular people don’t apply for loans they don’t intend to accept. He also dismissed the premise that smart meters are a necessary investment. “I see no evidence that we’re going to get more accuracy out of the electronic meters,” he said.

Council Member Sheri Gallo said that she hoped that the city, if approved for the loans, would explain to Council how the investments in new technology would end up saving ratepayers in the long term. She suggested, for instance, that the utility might spend less on labor if it put smart meters in place. Otherwise, she said, “I’d be very unlikely to vote for things that increase people’s utility bills.”

Both loan applications were easily approved 9-1, with Zimmerman casting the only dissenting vote. Mayor Steve Adler was out of the country

Council also voted to allow Austin Water to sell up to $295 million in bonds to refinance existing debt. According to staff, a favorable municipal bond market offers the utility the opportunity to save roughly $12 million by refinancing, partly by converting short-term “commercial paper” loans into long-term “revenue-refunding bonds” that are backed by the utility’s revenue.

Zimmerman contended that the city was breaking the law through its financial maneuver, since the city charter requires revenue bonds to be approved by voters.

Hart responded that the city’s attorneys had determined that state law, which does not require voter approval for revenue bonds, prevails over the charter.

On that issue, Zimmerman was able to persuade his fellow conservative, Council Member Ellen Troxclair, to also vote against, but the measure passed, 8-2.

Photo by Shane Pope made available through a Creative Commons license.

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