The Public Service Board voted unanimously Wednesday to ask El Paso City Council to allow El Paso Water to issue $356 million in revenue bonds to pay for a slew of construction projects and previous debt.

If City Council gives the greenlight, the bond would be split into three portions: $273 million for 27 water and wastewater maintenance and improvement projects, $80 million to pay off a line of credit and $3 million for any remaining interest costs.

The PSB, which oversees the city-owned utility, is asking for a 30-year bond to be paid back by 2052, at an interest rate of up to 4.25%.

Municipal revenue bonds do not require voter approval, but El Paso Water customers will still shoulder the bond costs. That future cost, which will be felt by higher rates, is unknown.

The utility requires immediate cash for big construction projects, said Arturo Duran, El Paso Water’s chief financial officer. 

“For the next three to four years, we’re going to see this is going to put pressure on our rates, (and) we might have to increase our customer rates,” Duran said.

The bulk of the bond money will be spent on three projects: $44 million toward buying and installing generators for weather emergencies, $67 million for Roberto Bustamante Wastewater Treatment plant upgrades and $12 million for the replacement of the Frontera Force wastewater main on the West Side.

Very little of customers’ utility bills goes toward financing capital improvement projects, Duran said. The income the utility generates from ratepayers first goes to pay operating expenses, followed by debt expenditures, leaving whatever is left to be spent on maintenance and construction. Much of the spending on large construction projects comes from lines of credit, he said.

The utility’s maintenance, construction and improvement projects for 2022 are projected to cost $533 million, which is more than double 2021’s $237 capital improvement budget.

El Paso Water already increased customer bills for 2022 to account for pending water supply and stormwater construction projects. As of March 1, monthly bills increased by an average $6.37 compared to last year.

Duran said these projects will help put the utility on better footing over the next three to five years, and said the stress on rates would decrease once the projects are finished.

“The need for (capital improvement projects) will subside and the rate increases would be minimum to none in the future five years. But it all depends if we continue with the plan going forward,” he said.

El Paso Water last sought a revenue bond in 2017, when council approved the utility issuing $152 million to finance construction projects and pay back debt. Those bonds must be repaid by 2038.

The utility plans to ask for additional bonds in 2023, according to a presentation at Wednesday’s PSB meeting.

Duran said it’s in the city’s best interest to approve the new $356 million bond request, noting that much of the pressure to increase construction came from City Council after historic monsoons tore through stormwater infrastructure last summer. He said issuing bonds is the only way to pay for this construction.

“The city is giving us some of the feedback that we need to expedite projects. So to be honest, this is to the benefit of not just residents, our ratepayers, it is to the whole city to improve the services,” Duran said.

The city is expected to consider the PSB’s bond request at the March 29 council meeting, Duran said. If all goes well, El Paso Water aims to issue the bond by April 26.

Two board members were absent from Wednesday’s meeting, Bryan Morris and Charlie Intebi.

Wednesday’s meeting was also the first for new board member Stefanie Block Uribarri, who replaced Chris Ancliff. Block Uribarri is the general manager at Pearl Properties, a real estate management and investment company.

Cover photo: Public Service Board members adjourn the public portion of their monthly meeting before going into closed session on March 9. (Danielle Prokop/El Paso Matters)

Danielle Prokop is a climate change and environment reporter with El Paso Matters. She’s covered climate, local government and community at the Scottsbluff Star-Herald in Nebraska and the Santa Fe New...