City looks to borrow $22M for new water treatment facility

Jacksboro City Council signed a notice of intent to issue certificates of obligation, looking to borrow no more than $22 million from the U.S. Department of Agriculture to fund the city’s new water treatment facility set to break ground next year.

The loan would pay all or a portion of the city’s contractual obligations regarding the facility, including designing, constructing and installing equipment as well as any incurred legal fees or engineering costs related to the project.

“We’re a little bit away from actually closing on this loan,” City Manager Mike Smith said Monday, Oct. 27. “We don’t have an actual interest rate yet, it’ll be closer to when we actually close. But there will be some public hearings we’ll have to go through.”

The city was eligible for $6 million in grant funding, but would have to use the money borrowed from USDA before tapping into those funds.

“This does not obligate the city or the council to anything. It’s just a notice that the intent is there to borrow the money,” Smith said.

The city’s current debt was approximately $5 million—about $4.3 million in actual debt plus added interest. Smith said without adding any new debt, the city could be debt free by 2032.

Officials said the loan would have minimal impact on ad valorem taxes as most of it would be repaid through the city’s water fund.

The city’s water fund is a proprietary fund and operates like a private business. It allows the city to recover costs for water and wastewater infrastructure and maintenance by charging usage and/or service fees.

“It does not affect the tax rate. That’s a separate issue altogether,” Smith said. “This loan is primarily proprietary, so primarily water and wastewater.”

Jacksboro City Council voted in September to increase residential and commercial water rates starting with the October billing cycle. The increase came as the city struggled to find additional revenue to fund the budget for the 2025-2026 fiscal year.

Smith recommended that rate increase and suggested the city council look again at raising rates once the new plant was complete.

Plans for a new plant began over a decade ago and funding has been the city’s primary setback. Current projections set the total cost to build a new water treatment plant at $28 million.

Built in the 1950s, the current water treatment plant has continued to produce quality water but was in need of extensive repairs that were labor intensive and expensive to maintain.

Smith said although the city would be taking on new debt with the USDA loan, the cost to maintain the new water treatment plant was expected to decrease significantly. Those savings in repairs could then be applied to the balance of the loan.

The process to close on the USDA loan stalled following the federal government shutdown on Oct. 1. Smith said the city hoped to close on the loan in December, but now could be looking at a later, unknown date.

“We had hoped to start turning dirt in January, but because of the shutdown, that’s going to push us back a little bit. We haven’t even gone out for bids yet,” Smith said. “We’re still probably four to six months, unfortunately, from turning any dirt.”

The project was estimated to take anywhere from 18 to 24 months to complete.