Presentation and discussion on Hidalgo County Capital Improvement Plan.

Mr. Sergio Cruz introduced Hidalgo County's Financial Advisor Mr. Noe Hinojosa and notified that they included the CIP for the request received. Mr. Cruz informed that they have updated the CIP list from what they had originally started, last year they had an immediate budget of a bit over $30 million dollars. Those two budgets were broken down into two different issuances, they issued $16 million dollars for precinct projects and now is proposing to issue another $14 million dollars this year to complete. He informed that they have reallocated some of the funding to other different projects in accordance to what the precincts have requested. Additionally, they also included other items that were included in the master CIP but were not part of the $30 million dollar discussion last year. Part of that includes $9 million dollars for the new courthouse soft cost, they have $4 million dollars in general funds that they unreserved for general funding. 

Mr. Cruz explained that the $9 million dollars are strictly for soft costs related to the new courthouse, for architectural and engineering, security and technological, as well as for other consultants that will be needed. $5.7 million was budgeted for voting machines, however last week they received a revised estimate for voting machines of $5.9 million. Mr. Cruz notified that they are working with the Elections Department to bring this new cost down. Right now they are requesting funding of a bout $5.7 million dollars. Mr. Cruz explained that right now they have roughly about $3 million dollars in heavy equipment from the precincts, they'll be buying about $750,000 dollars worth per precinct and proposed to issue $4 million dollars for vehicle replacement. 

Judge Garcia inquired from Elections Administrator Mrs. Yvonne Ramon about the new cost for the voting machines. Mrs. Ramon informed the judge that she spoke to Selize Liston and Peter Lichtenheld she explained that they discussed the need to double controllers, if in fact the parties do not joined their ballot. She disclosed that they might not have to double controllers, leaving it at approximately to what Mr. Cruz is asking at $5.7 million or less. Mr. Cruz stated that if it goes over $5.7 million it would depend on the amount of controllers they do buy, the other proposed amount if they do not buy any controllers would be a little less than $5 million dollars. As of right now, they are looking at buying additional controllers and would like to leave the request at $5.7 million if the amount goes down they'll utilize it for the courthouse. He further explained that for roads they included a propose issuance for 2016 of $38,759,000 million dollars. 

Commissioner Cantu questioned Mr. Cruz about the county wide shop. Mr. Cruz informed that right now the shop is located in downtown Pharr  however, the proposal suggest to move it to the new shop in precinct 2. The estimated cost to do it is about $1.2 million however, the precinct is also looking at those cost numbers and might change a little bit. At the moment they do not have it as one of the plan projects, one of the funding strategies was to increase the issuance of $1.2 and once it's constructed and moved maybe selling the land and be able to pay off the debt. 

Commissioner Cantu explained that the county wide shop has always been under precinct 2, although it receives its own funding. Nevertheless it has always been managed by the precinct, the commissioner reminded that the maintenance and facilities building moved its operation from downtown Pharr to the South San Juan area, leaving the shop in Pharr. He reported that the shop is in the same condition that the facilities building was, and that was the reason they moved. The commissioner commented that the precinct will provide the land and are currently working on the architectural plans and that it would be great to have both shops together. He also informed that the precinct has been putting its own money into it. On that regard, Mr. Cruz mentioned that if they were to include it, the debt service this would increase roughly about $95,000 per year over a 20 year debt. He noted that it might be manageable at this time but suggested to have Mr. Hinojosa explain the adjustable. 

Mr. Noe Hinojosa informed that right now they are not looking into borrowing money until June 14, 2016 he reaffirmed that this is was only a workshop and no action was required. He pointed out that page 5 of the booklet provided explained how the courthouse financing will impact the tax rate, and how it will also affect the CIP projects. Mr. Hinojosa explained that the Debt Funded CIP only includes borrowings related to the CIP and does not include the courthouse financing. Mr. Hinojosa disclosed that the recurrent conversation with the judge and the commissioners has been about how much this debt financing will impact the tax rate. He informed that the judge and the commissioners have instructed to minimize the tax rate impact. As of today, the county's tax rate is $.59 this amount is what the county levy based on property values, about $28 million dollars. Mr. Hinojosa stated that it's not the staff's intent nor the consultants to change the tax rate of $.59 and understands that the court has been persistent about it. Nevertheless, they'll have to shift the tax rate that deals with paying off the mortgages or in other terms the debt payment. The levy right now is $0.0675 so, when they levy $.59 from there $.00675 is what goes towards paying debt service, that tax rate will go from $.00675 over the next five years to about $.00875 the portion of $.59 will remain at that. However, the portion leading or dealing with the operating budget, instead of having $.51 or $.52 to make up for the $.59 of the operating budget will have to be drawn down to $.50

Judge Garcia stepped away from the meeting.

Mr. Hinojosa remarked that people have asked how this would affect the operating budget. He determined that 5 years from now, that $.50 should be enough to deal with the operating budget. Despite of that they'll still need $0.02 to deal with debt service, he assured this is not a uncommon practice for cities, counties or school districts to shift tax rates within a total tax rate. 

Additionally, he mentioned the Capital Improvement Plan (CIP) Request form that was put together by Mr. Sergio Cruz and staff, this management tool was put together in talking with various precincts and department heads. Mr. Hinojosa recalled that a couple of years ago this same list was at $330 million dollars and now is about $300 million dollars appropriately seeing a reduction. He informed that they are trying to keep it on check and for it to stay the same, and if there're going to be additions such as Commissioners Cantu's county wide shop in precinct 2, this would have to be considered. As the CIP is a management tool, in it they will add or delete projects, whatever those might be when the money is borrowed, not only for the benefit of the tax payer but also for the benefit of the credit rating agencies who maintain the county's credit at AA, they want to make sure that the county is consistent. What's also important is the courthouse project, instead of funding $150 million dollars that was originally anticipated, there's $9 million dollars of soft costs that have been included to the CIP. This amount will be subtracted from the financing for the courthouse, so on project funds there's $141,000,000 with the debt financing for the courthouse to take place sometime in September 28,2016 

Judge Garcia joined the meeting.

Mr. Hinojosa stated that very likely the courthouse is not going to get done by November of this year or next year, all depending on the decisions for the facility. At the end of the day the courthouse project is not going to be $150 million dollars, it is going to be $141 million dollars. He informed they'll take out the loan 30 years out, the soft costs will be embedded on the financing they're doing now. Mr. Hinojosa explained that the financing they are doing now is so that the amount $29,759,000 that is being funded for this project, then another $9,000,000 million dollars for soft costs. For an overall financing of $38,759,000 with an interest rate of 3.34% he mentioned that today rates are more about 3.11% and so, they are being conservative as how they'll be representing those payments. The advisor stated that at the end of the day they're not going on a 30 year loan but instead a 20 year loan, every single loan for CIP purposes is going on 20 years. Mr. Hinojosa disclosed to the members what the payments would be for the CIP and courthouse. He informed that next year they'll be looking at a CIP requirement funding of about $7 million dollars in 2017 leading all the way to 2019 for an amount of $17 million dollars, he assured that these numbers will change just like property values change. Once more, he restated that the court members have been adamant about keeping the tax rate at $.59 he commented that this tax rate has been stable for the last 10 years or 15 years and anticipates that will stay the same.

Commissioner Palacios asked Mr. Hinojosa if he would recommend to not sell bonds until next year, when they're actually in the position to go at it completely. The commissioner questioned if there's any benefits to selling now or later. On that regard, Mr. Hinojosa explained that the only benefit would be that they'll have an identify cost of borrowing today, indicating that the TIC is at 4.65% today the county can borrow those dollars at a 3.65% so in regards to the benefits, today the interest rates are favorable. Unquestionably Mr. Hinojosa assured that he would never suggest to borrow simply because interest rates are favorable. Last year they put $4 million dollars out of the settlement account and restricted that money for the purpose of the architectural design. As to when they will borrow the money for the new courthouse, the financial advisor commented that it could be in November or even all the way into February. He explained that the longer they take the better they'll be in terms of knowing they borrowed the right amount of money. 

With all that considered, the commissioner assured that the intent is to go out and leverage and get ready to get some state and federal dollars using the State system on the proposition 1 funding. He also questioned the appropriate timing for all the parts to start moving. The commissioner also commented that they need to borrow appropriately only what's needed. Mr. Hinojosa agreed with the commissioner, and stated that they can not borrow all the time, when borrowing money to borrow only once a year preferably. Mr. Hinojosa referenced the very healthy fund balance that the county currently has, they count with $28 million dollars of unrestricted funds but about $45 to $46 million dollars of fund balance when including encumbrances yet again, he reaffirmed the court that they're in a healthy condition and the question is if to borrow $9 million plus the $4 million they already have for this project, or spend $13 million dollars. Mr. Hinojosa informed they were given the task to solved for the courthouse financing and the CIP financing, the team bankers discussed setting aside $0.01 for the courthouse and $0.01 for the CIP. 

Commissioner Palacios commented that it's important to focus on the infrastructure because it affects all tax payers. 

Judge Garcia explained that the Commissioners Court main obligation is to provide a jail, courthouse and repair roads. 

Mr. Hinojosa moved on and reviewed a graph that showed the debt profile and what the payments are today if they do nothing, and then what the payment would be about funding the CIP for the courthouse. 

Mr. Sergio Cruz commented that the letter of intent was set for May 3, 2016 however, the next meeting is now schedule for May 10, 2016. Mr. Hinojosa commented that they're not in a hurry to sell bonds and so, they can certainly act on May 10, 2016. He informed the members that they could take action next week, but would rather if they took time and not feel pressure. If they do decide to act on it then could start borrowing CIP money, not courthouse and does include the soft cost of $9 million dollars.

Once more Commissioner Cuellar informed Mr. Hinojosa that there'll be no court May 3,2016

Additionally, he presented a performance of the upbringing budget, he underlined the main points for a credit analyst. Those being the taxes, health and welfare and transfers out. Tax revenues have increased from $141,234,606 in 2011 to $154,663,083 in 2015. Expenses have also increased from $151,898,745 in 2011 to $170,743,324 in 2015, the tax and health revenues also went up.

Mr. Hinojosa allowed for Mr. Cruz to explained how health and welfare increased in 2013. In regards, Mr. Cruz informed that this increase dealt with the 115 Waiver funding. In 2013 they contributed about $2.8 million dollars to the 115 Waiver entity funding, that got multiplied, so on the revenue side the intergovernmental jump from $6.3 million to $14 million and that's because they had revenues of $7 million dollars that came back from the IDT multiplier and see those expenditures that were sent out. In 2014 they changed the contribution for the uncompensated care and in 2015 they reduced it to $6 million dollars. On the transfers out they had an additional item in 2015, in 2014 during the budget process for 2015 they contemplated to issue debt sometime in October of 2014, since the debt was not issued they could not include it into the debt calculations and so, they decided to include it as a transfer out in the general funds and that's the reason why it shows as an increase in the transfers out. In 2014 and 2015 they also did an increase on transfers out for road and bridge, there were expenses moved out for some of the road repairs in 2015 due to the rains and flooding. Due to these repairs they transferred from the general fund to the road and bridge, in order to alleviate some of that funding.

When looking at the credit, Mr. Hinojosa stated that the transfers out is a big number and people will want a breakdown of it. What's also important to credit is the bottom line, basically the savings account. In 2015 the savings account is projected to be at $46,700,000 million dollars. The highest the savings account has been in Hidalgo County was in 2012 at $50,251,000 then dropped to $50,031,744 in 2013, and in 2014 dropped a bit more to $45,000,000 and now the projector has change from dropping to back up. This increase is a good sign for credit purposes and is expected to stay on top of that and not keep dipping into the fund balance, either stay with it or improve it. Mr. Hinojosa expressed that despite the transfers out they were able to recover.

The financial advisor reviewed the total expenditures indicating that in 2011 the expenditures were $151 million dollars and in 2012 $154 million, then in 2013 it went up to $173 million dollars as well as in 2014. As of now for 2015 expenditures have dropped to $170 million dollar, he reminded the court that people expect to the county to keep an eye on these numbers.

Mr. Hinojosa finalized the presentation and affirmed he would be present when needed. 

Mr. Cruz asked the court if it would be acceptable to post the notice for approval for next week or wait. Commissioner Palacios expressed that it would be proper to post.