DALLAS — Dallas may finance a $300 million drainage project with revenue bonds rather than with proceeds from a $500 million general obligation package expected to go to voters in November.
City Council members directed city manager Mary Suhm to provide options for financing the stormwater system project, including a mixture of revenue and GO bonds, before the final parameters of the upcoming package are determined.
The revenue bonds would be issued by Dallas Water Utilities.
Financial options will be presented, Suhm said, but the final decision will be up to the council.
“All this has to come out of somebody’s pocket, where it is a fee or a tax,” she said. “You all will have to decide that. That’s what you all get elected for, is to make those really tough decisions.”
Preliminary indications are that the GO proposal will be between $450 million and $550 million, which would not require an increase in the city’s property tax rate.
A single project to build a large tunnel east of downtown Dallas in the 2012 program could cost up to $323 million, Suhm said, which would leave little capacity for other needs. Several creeks in the area were paved over and channelized in the 1920s, she said, which leads to severe flooding during heavy rains.
Councilman Scott Griggs pushed for the revenue bond option, which he said would free up millions of bond dollars for parks, libraries and streets.
Dallas needs to move from using the property tax to support bonds for drainage projects and instead rely on fee-based utility revenues, he said.
Dallas will have a backload of $1.5 billion in unmet drainage needs even if most of the 2012 proceeds are expended on the specified drainage projects, Griggs said.
“If we have a bond election every four years, we’ll be spending $300 million from each bond program through 2030 just to clear this current backlog,” he said. “That is going to eat us alive. We need to look at how we can modernize this stormwater system so that the people who are producing stormwater are paying their fair rate.”
Kelly High, director of the city’s Trinity River watershed management department, said $300 million of revenue bonds for the effort would require a doubling of the current stormwater fees.
The stormwater utility currently pays $13.2 million a year in debt service on city GO bonds issued for drainage projects, he said, but debt service would go to $24 million a year if the $300 million of revenue bonds are issued.
The fees, which vary depending on the type and size of property, currently generate around $42.9 million a year, according to High.
Dallas voters approved a $1.35 billion GO bond package in November 2006.
Dallas has $1.8 billion of outstanding GO debt rated AA-plus by Standard & Poor’s and Aa1 by Moody’s Investors Service.
Dallas Water Utilities’ $1.75 billion of outstanding revenue bonds are rated Aa1 by Moody’s and AAA by S&P.
