Feb. 13--MCALLEN -- Hidalgo County Water Improvement District 3 recently started borrowing money to fund day-to-day operations -- again.
On Wednesday, District 3 had roughly $20,000 on deposit, said General Manager Othal E. Brand Jr., who also heads the district's five-member board, and nothing available for an emergency -- no operational reserve and no capital reserve.
Without enough liquidity to fund day-to-day operations, District 3 recently opened a $750,000 revolving line of credit at Texas Regional Bank at 5.5 percent annual interest. District 3 carried a $225,000 balance on Wednesday.
"We'll be fine. I have no concern," Brand said when asked about District 3's financial situation.
District 3 pumps water from the Rio Grande to the McAllen Public Utility's new reservoir near McAllen-Miller International Airport. Farmers and McAllen homeowners who flood-irrigate their yards also buy water from District 3, but the Public Utility remains the single-largest customer.
In the current fiscal year, District 3 projected the Public Utility would pay about $1.3 million for water -- and all other customers would pay just $96,000 toward the water district's total $1.4 million budget.
The Public Utility, though, didn't buy any water during October, November, December or January. Meanwhile, District 3 kept spending money on major capital improvement projects.
General Manager Roy Rodriguez said the Public Utility purchased all water under McAllen's contract with District 3 by September. Any financial planning problems weren't the Public Utility's concern.
"I didn't consult with them," Rodriguez said. "I'm not their financial adviser."
District 3 still had invoices from major capital improvement projects and regular bills, Brand said, and they couldn't be delayed until the Public Utility started buying water again in 2014. To keep spending, District 3 needed the revolving line of credit.
Regardless, Brand said District 3's financial situation didn't worry him.
District 3 and the Public Utility have an annual take-or-pay contract, which obligates McAllen to eventually pay the $1.3 million projected revenue. Under the deal, District 3 sets aside water exclusively for the Public Utility. In return, the Public Utility must pay District 3 for the water every year.
Since McAllen will pay District 3 eventually, Brand said the $225,000 debt doesn't worry him. Additionally, District 3 recently sold property in Hidalgo for $125,000, which will help pay down the balance.
"It's just the cost of doing business," Brand said, adding that revolving line of credit from Texas Regional Bank will provide District 3 a financial cushion until the Public Utility either orders water or pays under the contract for 2014.
Borrowing money to fund day-to-day operations isn't anything new for District 3.
In 2011, the Public Utility didn't buy water for months, forcing District 3 to obtain a $500,000 revolving line of credit from First National Bank. The Public Utility deliberately avoided buying water, attempting to strain District 3's finances amid a full-blown takeover attempt by McAllen, Brand said, but the city failed.
"They ran out of water before we ran out of money," Brand said. "And to me, that was just silliness."
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