Lubbock Economic Development Alliance to use $28.7M sales tax revenue bonds for first time to finance projects

Published: Dec. 19, 2022 at 8:54 PM CST|Updated: Dec. 19, 2022 at 10:16 PM CST
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LUBBOCK, Texas (KCBD) - The Lubbock City Council gave the Lubbock Economic Development Alliance the ability to issue up to $32.5 million in sales tax revenue bonds to pay for infrastructure and land, a first for LEDA in how it finances economic development projects and operations.

“For the last decade, we’ve been able to cash flow all of our operations and also all of our projects that we’ve approved,” CEO John Osborne said. “The success over the last couple of years has, and the opportunities that we’ve got laid before us probably for the next 24 months, we see that we’re not going to continue to be able to cash flow every one of these projects.”

While LEDA can issue a maximum of $32.5 million, Osborne said it only expects to need $28.7 million.

“We’re taking some of our existing projects that we’ve already approved, including the infrastructure for Leprino Foods and the infrastructure for WL Plastics, and basically financing those along with financing some purchase of land that’s going to help us with advocating for some of our existing businesses to grow and for some new companies to move into our community and bonding that over a time period.”

According to information presented to the City Council by financial advisor Hilltop Securities, LEDA expects to pay back the debt in 22 years or less using the portion of Lubbock’s sales tax the Alliance collects, 1/8 of 1-cent.

“You can either sell those in the private market, those bonds, or you can sell them in the public market,” Osborne said. “We feel like we might get a better deal where it’s not as high of an interest rate, where we can pay it off quicker, if we were to go to the private market and sell these bonds to the banking community who are also very interested in still helping out with this project. That’s our game plan right now.”

Osborne told KCBD that LEDA went to the banking community early in this process to obtain a loan, as it did many years ago for investments like the Lubbock Business Park. However, the Alliance discovered a change in the law.

“We took out a loan where we pledged our sales tax revenues, which is a different kind of process,” Osborne said. “This is the very first time we’ve actually bonded our sales tax revenues. It’s actually fairly common amongst economic development corporations to bond out the revenues because it’s very expensive to put in streets and utilities.”

In the city council meeting on December 6, Mayor Tray Payne emphasized multiple times that this move will not impact City of Lubbock’s taxes or debt.

“If there were a default, or if something tragic happened, who knows what the future holds, but there’s zero recourse against the City of Lubbock,” Payne said. “If there were a default, the obligation would still be, that 1/8 cent sales tax would be the recourse.”

The bond sale process is expected to begin in January with the funds expected to be collected in the following month.