Meeting Date:
October 13, 2026
Staff Contact:
Rick Shaffer, Director of Water Utilities
Discuss and Take Action on a Resolution Directing Publication of Notice of Intention to Issue Up to $3,000,000 In Tax and Utility System Surplus Revenue Certificates of Obligation, Taxable Series 2027, to Provide Funds For Utility System Improvements; And Resolving Other Matters Relating To The Subject.
BACKGROUND/DISCUSSION
Staff is requesting City Council approval of a resolution authorizing the publication of a notice of intent to issue Tax and Utility System Surplus Revenue Certificates of Obligation, Taxable Series 2027 ("CO" or "COs") in the principal amount not to exceed $3,000,000 for the purpose of financing the replacement of public and private water service lines made of either lead or galvanized pipe materials. This program is necessary to comply with the new Lead and Copper Rule Revisions issued by the U.S. Environmental Protection Agency ("EPA").
While the 1986 Lead Ban in Safe Drinking Water Act was adopted in 1988, many water systems may still contain lead service lines ("LSL") in their system. In 2021, the EPA issued the Lead and Copper Rule Revisions ("LCRR"), which is an update to the previous Lead and Copper Rule. There are several new requirements in the LCRR, but the primary objective is to remove 100% of the lead service lines in water distribution systems. This includes both LSL and certain service lines made from galvanized pipe, known as Galvanized Requiring Replacement ("GRR"). The LCRR went into effect starting October 2024. Then, in November 2023, EPA released an update to the LCRR called the Lead and Copper Rule Improvements ("LCRI"), which was later finalized in October 2024. The primary requirement of the LCRR/LCRI is that it requires 100% lead pipe replacement within 10 years, beginning in 2027 with final completion by 2037. Even though water providers are allowed up to 10 years to comply with the new rule changes, City staff have set a goal of achieving completion by December 2027, subject to TWDB's review schedule.
In May 2023, the Water Utility submitted a Project Information Form ("PIF") to the Texas Water Development Board ("TWDB") related to funding of the Lead Service Line Replacement Program. The project identified in the PIF included completing the inventory for all public and private water service line materials, engineering services, replacement of lead and galvanized service lines, additional sampling after replacement of service lines, and additional contingencies. The TWDB notified city staff in May 2024 that the project was selected, and the TWDB invited the City to submit an application for funding up to $14,982,440 at 51% principal forgiveness (i.e. grant funds) and 49% loan/bonds. The formal application was then submitted to the TWDB, and has since been approved by the TWDB. Following completion of the inventory phase, the estimated cost of replacement has been reduced to approximately $6 million; and therefore the amount of this CO is up to $3,000,000.
The certificates will be sold directly to the TWDB, which will purchase the entire issue at a below-market interest rate set by the TWDB's DWSRF program. Because the program includes the replacement of service lines on private property, the bonds will bear a taxable interest rate. Debt service on the certificates will be paid solely from Water Utility rate revenues.
The issuance of certificates of obligation requires a two-step process. First, the City Council must authorize the publication of a notice of intention to issue the certificates. Following this publication (which must appear in a newspaper of general circulation in the City once a week for two consecutive weeks, with the first publication occurring at least 45 days before the date tentatively set for the passage of the ordinance authorizing the issuance), the Council may then approve the actual issuance of the certificates.
If approved, the notice of intent will be published in the Weatherford Democrat on October 17, 2026 and October 24, 2026. The ordinance authorizing issuance of the certificates is anticipated to be presented to City Council on December 15, 2026, with closing with the TWDB anticipated on or about January 14, 2027.
FINANCIAL IMPACT
The principal amount of the certificates will not exceed $3,000,000, representing the City's 49% share of the approximately $6 million project. The remaining 51% will be funded through TWDB principal forgiveness and does not require repayment. Of the $3,000,000 in proceeds, approximately $2,872,500 will be deposited to the project fund, with the remainder covering costs of issuance ($67,500) and the TWDB loan origination fee ($60,000).
Based on preliminary estimates from the City's Financial Advisor, Hilltop Securities, assuming a conservative 5.00% interest rate and a 20-year term, annual debt service is estimated at approximately $245,000, with total debt service of approximately $4,741,583 over the life of the certificates. The first-year payment in FY27 is estimated at approximately $94,583 (interest only). The actual rate will be set by the TWDB at closing and is expected to be below market. Debt service will be paid solely from Water Utility rate revenues. No property tax revenues will be used, and the issuance will have no impact on the Interest & Sinking (I&S) tax rate.
SUGGESTED ACTION
Staff recommends that the City Council approve and adopt Resolution R2026-21 authorizing the publication of a Notice of Intention to issue up to $3,000,000 in Tax and Utility System Surplus Revenue Certificates of Obligation, Taxable Series 2027, to provide funds for utility system improvements.
ATTACHMENTS