SUBJECT: An ordinance amending ordinance 2014-1139 approving an economic development agreement between the City of Houston and Harris County Improvement District No. 12 pursuant to Chapter 380 of the Texas Local Government Code for the construction of sanitary sewer line within the Holmes Road Right of Way
RECOMMENDATION: (Summary)
That the City Council approve an ordinance amending ordinance 2014-1139 approving an economic development agreement between the City of Houston and Harris County Improvement District No. 12 pursuant to Chapter 380 of the Texas Local Government Code for the construction of sanitary sewer line within the Holmes Road Right of Way
SPECIFIC EXPLANATION:
In 1989, the State legislature enacted Chapter 380 of the Local Government Code (“Chapter 380”) to create a mechanism that allows municipalities to grant or loan public funds for economic development purposes by creating one or more programs to promote economic development and stimulate business and commercial development. Subsequently, by Ordinance No. 99-674, the City established the City of Houston Chapter 380 loan/grant program. The Administration now proposes to enter into the Agreement with Harris County Improvement District No. 12 for the partial payment related to the construction of a 48” sanitary sewer line within the right of way of Holmes Road between Buffalo Speedway and Knight Road.
On December 10, 2014, City Council approved Ordinance 2014-1139 allowing for the increases in the City’s portion of its property tax revenues in a defined economic impact area as the source of the annual debt service payment on a bond issuance for the construction of a sanitary sewer line in the right of way of Holmes Road from Buffalo Speedway to Knight Road. The construction of the line will provide much needed waste water capacity to more than 1,700 acres within the sewer line’s service area.
The City’s Public Works and Engineering Department (“PWE”) will be responsible for the design and the construction of the Project. On June 18, 2014, City Council approved Ordinance No. 2014-621 for the planning and design of the Project. At the completion of the design phase, the construction phase will proceed.
The estimated cost of the project is $14.6M including construction, design, easement and right of way acquisitions. The “upfront” construction costs will derive from two sources. PWE will provide approximately $6.8M from Enterprise Fund as described in a separate agreement (the “Cooperative Development Agreement”) and HCID No. 12 will provide approximately $7.8M from revenue bond proceeds issued by the district. The estimated annual debt service payments, if a single bond is issued is an average of $625,000 and will be made from the incremental revenue generated from the established economic impact area. The City’s obligation will be the lesser of the annual debt service requirement or the incremental revenue but will never exceed the incremental revenue.
The proposed amendment is to allow for the District to secure third party financing as an alternate financing option to the bond debt issuance. Interest on third party financing will be limited to the lesser of the actual borrowing rate on the debt and not to exceed the maximum allowable interest rate on District bonds.
City Secretary
Mayor's Office
Legal Department
Finance Department
Marta Crinejo