Page 323 - City of Watauga FY22 Adopted Budget

DEBT SERVICE

Water and Sewer Certificates of Obligation
Debt Service Fund 44

The Water and Sewer Certificates of Obligation Debt Service fund is used to account for
Certificates of Obligation whose principal and interest are payable from earnings of the
City of Watauga's Water and Sewer Enterprise Fund. The original debt in the amount of
$11,370,000 was used to purchase the Water and Sewer system from the City of North
Richland Hills in October 1996, to build the necessary infrastructure, including an
elevated water tank, and to purchase the necessary equipment in order to efficiently run
the utility system. In July of 2001, City engineers, along with the firm of Knowlton -
English - Flowers, Inc., produced a Capital Improvement Plan. Over $2.8 million in
water and wastewater needs where detailed in this plan. Due to the urgency of some of
these needs, the City issued revenues bonds during FY2001-2002 to fund $1.7 million
of these projects and the remaining projects were completed on a pay-as-you-go basis.
Due to low interest rates, the City was able to refund the 1996 Certificates (years 2008 -
2016) in FY2004-2005 for significant savings.

In July 2011, the City issued $7,365,000 of Combination Tax and Limited Pledge
Revenue Certificates of Obligation. Of this amount, $2,780,000 is payable from and
secured by a lien on the net revenues of the City’s utility system, and the remaining
$4,585,000 is funded by ad valorem taxes. These bonds financed heavy equipment for
water and sewer operations, and various improvements to the utility system. This
issuance was refunded in November 2020, resulting in an interest savings of $84,000
for the remaining bonds.

In July 2012, the City issued $7,730,000 of Combination Tax and Limited Pledge
Revenue Certificates of Obligation. These bonds financed Water and Sewer Projects
that have been completed.

In FY2016-2017, $1.2 million of the Utility Fund debt service dropped off due to the
final payment being made in FY2015-2016 for the debt service associated with the
purchase of the Water system from North Richland Hills. In the summer of 2017, the
City Council considered and approved additional utility project infrastructure funding by
issuing certificates of obligation in the amount of $7.325 million. These funds were
received in August 2017 and are funding several water and sewer projects identified in
the City’s 5-year Capital Improvements Project plan.

An $8.490 million Combination Tax and Limited Pledge Revenue Certificates of
Obligation was issued in August 2019. $8.065 million of the issuance was dedicated
to water sewer projects and to fund capital equipment and the remaining amount will
fund general capital equipment and projects. These Water and Sewer infrastructure
projects will continue throughout the next several years.

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