The Pecos City Council voted to approve a plan of finance for the city’s water system improvement project that will use combination tax and revenue certificates of obligation to be purchased by the U.S. Department of Agriculture.

Financial advisers and bond counsel on a virtual presentation told the council the city would issue an estimated $24.75 million in certificates of obligation to fund wells, transmission lines, pump stations and related improvements. Thomas Straps of Triana Financial Consulting said an estimated fixed interest rate for modeling was about 1.37 percent and that USDA loans of this type are amortized over 40 years; bond counsel noted that USDA financing requires draws and reconciles disbursement as the work is completed.

Dan Martinez, city bond counsel, added that the project has a substantial grant expected to supplement the loan (roughly $15 million as discussed with staff) and that USDA requires the debt proceeds to be used before grant reimbursement. Staff said the city’s plan assumes utility revenue will cover the USDA debt service and that the city’s tax rate would not need to increase to support the loans under current projections.

The council also directed staff and the financial team to provide final numbers and a full debt-service schedule prior to the firm rate lock; the timeline presented estimated a USDA rate lock in July and a closing on or about Aug. 21. A motion to approve the plan of finance passed by voice vote.