Gatesville advances up to $25 million bond for water repairs

Gatesville leaders took a major step toward financing overdue water-system repairs Monday night, approving the paperwork for a bond sale that could reach $25 million but was ultimately set at $20 million. City officials said the money is aimed at the parts of the system that keep water moving from Lake Belton to Gatesville taps, including raw-water intake pumps, electronic components and the intake plant generator.

The Gatesville City Council met at 5:30 p.m. June 9 at Gatesville City Hall to consider a notice of intention for certificates of obligation tied to permanent public improvements in the city’s combined utility system. The notice capped the borrowing at $25 million for water utility work, related land and rights-of-way, and professional services. City staff and financial advisers said the bond was structured to avoid an immediate hit to the property tax rate, with repayment expected to come primarily from water-system revenues.

Deputy City Manager Mike Halsema said a rate study by NewGen Strategies, along with engineering work by Freese and Nichols, identified urgent repairs and improvements in the city’s water and sewer system. Freese and Nichols completed Gatesville’s Water Production Master Plan and Long-Term Capital Improvement Plan in 2024, and the city’s 2024 Consumer Confidence Report says Gatesville’s drinking water comes from surface water and groundwater from Lake Belton in Bell County.

The bond sale drew six responses before being awarded to Robert W. Baird & Co. Municipal adviser Blake Roberts of PFM Financial Advisors said the winning bid carried a true interest cost of 3.93 percent. The final issue was $20 million, with a reported principal amount of about $19 million, to be repaid over roughly 20 years as tax-exempt debt. The structure also includes a 10-year call option, giving the city a chance to refinance if borrowing conditions improve.

Roberts said the city’s total debt would rise to about $36.9 million, with final maturity around 2046. City documents also tie the new water-rate structure to the FY 2025-2026 Water and Sewer budget and capital needs, including the city’s practice of billing new customers on a citywide average of 6,000 gallons a month until a winter average is established.

The stakes go well beyond an accounting exercise. Gatesville’s Water Production Department runs 24 hours a day, 365 days a year, and serves about 4 million gallons a day in winter and nearly 11 million gallons a day during hot, dry periods. The intake plant also serves wholesale customers, North Fort Cavazos and prisons in the city, making the reliability of the Lake Belton intake system a regional issue as well as a local one.