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During continued efforts bid to buy its wastewater system from the LCRA, officials from West Lake Hills have come up with a plan that could save both entities a hefty sum.
In addition to paying the full sum for the cost of the wastewater system, the city would be responsible for a $2 million bond defeasance fee.
“The bonds aren’t callable right now, and since they can’t be paid off right now, they have to be defeased,” City Administrator Robert Wood said. “Since you can’t pay them off now, you put a certain amount of money in the bank in an escrow account and keep making the payments until they can be paid off.”
In order to avoid this, city officials have asked the LCRA if it would be possible to transfer their debt to some future project instead of defeasing it, then issuing new debt to another city or organization. While it’s obviously beneficial to the city, officials had to do a cost analysis to see if it would be beneficial to the LCRA as well.
“It comes down to the cost of our debt versus new debt,” Wood said. “There is a whole lot of money involved in just issuing the debt… Also, the interest on our debt is better than the current market rate. And that’s where we’ve been for the last couple of months discussing this idea with them.”
Since the closest physical representation of bond law would be an ancient Greek labyrinth, city officials have been speaking with Attorney Jerry Kyle about the legality of this idea. According to Wood, both he and the LCRA lawyers agree that it’s legal so for the authority, it comes down to a policy issue.
“The LCRA has stopped short of agreeing that this is a good idea, they have concerns about it,” Mayor Dave Claunch said. “They’re discussing the merits of our proposal. Our financial advisor thinks it’s a great idea, and our bond counsel thinks it’s a great idea.”
Since the discussions are still in a generally informal state, spokesperson Emlea Chanslor said the LCRA had no official comment on the plan, but did say “we’re committed to working with West Lake Hills to find something that works for their remaining customers and our customers as well.
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