A $12 million backup power project at the Belton Lake water plant will move forward after the board for Bell County Water Control and Improvement District No. 1 on Wednesday approved a bond order to issue debt since all but one area city offered official approval.
Killeen City Council members are expected to consider approval on Tuesday.
How much each city is expected to pay could change slightly, however, according to Ricky Garrett, general manager of the agency.
What each city’s commitment hinges on is the interest rate the water district secures in the bond market. Garry Kimball, the district’s financial advisor, explained Wednesday morning that the recent U.S. Federal Reserve interest rate hikes may impact the district on the bond market.
Kimball explained the board that right now, he and the district are budgeting on a projected 4.75% interest rate.
“I’m hopeful that we can get this locked in somewhere in the high fours,” Kimball said. “But the only constant right now is volatility in the bond market. And so there’s just no way I can make a guarantee on that until we get closer to locking rates.”
Kimball explained that now that the board has approved the bond order, there are specific steps that must be taken before locking in the rates.
First, Kimball said he and his team are drafting the offering documents, which will be shared with the market once they’ve gotten legal comments and the district’s comments on the documents. Then the documents will be submitted to Moody’s Investors Service, which will review the district’s credit rating of its water system revenue bonds — a process that could take around four weeks.
“So it’s probably going to be end of July, potentially first week of August, before we can get into the market and actually lock in our rates,” Kimball said.
A lack of backup power generation at the Belton Lake water plant was felt by residents in Killeen, Harker Heights, Copperas Cove and Nolanville in May when an Oncor fuse blew, causing the plant to lose power for three hours, and forcing 200,000 people and businesses across the area to be placed under boil-water notices for days.
Senate Bill 3, approved during the 87th Texas Legislature session, required special districts, such as WCID No. 1, to have backup generation that would provide continuous power in the event of a power outage that lasts longer than 24 hours.
The district needs approval from all customer cities and entities prior to issuing debt, however, based on how it is structured, Glenn Opel, the district’s bond attorney, told the board.
Tuesday evening, the Copperas Cove City Council voted 5-0 to approve its portion, with Councilmen Fred Chavez and Jack Smith absent.