Pearland City Council Monday approved a resolution to amend the city’s comprehensive financial management policy statement, according to reports. Earlier, the maturity of debt issued as a certificate of obligation has been set at 20 years. Now the City Council can extend the term of the certificate of obligation up to 30 years. Following this decision, big projects including city buildings and utility projects can look to extend their debt up to 30 years. “It provides more flexibility for the city, helps us manage the tax rate and the debt going forward as different projects come up,” Pearland’s financial advisor John Robuck was quoted as saying in a report. However, some council members have opposed certain aspects of the move. However, the City Council members voted for the amendment with a 4-2 vote.
Though Council Members Alex Kamkar and Woody Owens voted against the amendment, both of them voted in support of the resolution later. From now on, the council will have to approve first the projects that could be financed for 30 years. However, there is an issue with debt service average while going for a longer period of debt, some experts pointed out. The proposed certificate of obligations in 2022 is $16.4 million and could fetch interest of $7.88 million in 20 years. In short, it could fetch annual debt service of around $1.22 million. However, when it comes to a 30-year finance plan, the interest would be $12.2 million. At the same time, the annual debt service average will be only $962,693. Some observers pointed out the amendments should have been structured in favor of the taxpayer. This could have been more taxpayer friendly, they added. However, any new policy measure will require time for testing and it needs at least one year to assess the success of the new measure.