After a lengthy debate during an Aug. 23 joint meeting between the Magnolia 4B Community Development Corporation and City Council, the 4B Corporation agreed to assume the debt service for the movement of utilities along FM 1774 to avoid a city tax increase.

Council members had requested a three to five year contract agreement with 4B at $102,038.52 each year. However, 4B agreed to a two year agreement with a review each year.

The debt and payment amount comes from a $2 million dollar loan the city borrowed from the Texas Department of Transportation (TxDOT) Special Infrastructure Fund which would provide funding for the city to move the utility lines along FM 1774 between Friendship Drive and 10th Street.

TxDOT is spending $10 million to widen FM 1774 from Friendship Drive to 10th Street and is unable to move forward with widening plans until the City of Magnolia adjusts utilities within that stretch of the roadway.

If 4B assumed the debt service for the loan repayment it would be forced to re-evaluate its budget and possibly postpone several projects.

However, if the City of Magnolia were to assume the debt of the loan, the citizens of Magnolia could face a tax increase.

The FM 1774 project has been reaffirmed as a legitimate 4B project, according to City Administrator Paul Mendes. The 4B Corporation already paid for engineering, costs to assess the utility pipes and design plans for movement.

All 4B members agreed that the FM 1774 project has to be done. Pat Zaiontz, 4B member, said that 4B should not have to assume a city debt.

“It’s a city debt. I don’t think we should have to take it,” he said. “It should be one year at a time just to help out.”

Zaiontz added that 4B has already used some of its reserves, taking its reserve amount from $150,000 to $95,000.

Jerry Reed, 4B member, said the road has to be done, but if 4B took on the debt service for five years that would put 4B out of business.

Members of 4B originally agreed to a one year contract agreement with a review each year, however, after holding a joint meeting with city council, 4B members agreed to a two year contract with a review each year.

Council members said that without an agreement the city would have to put the burden on the citizens by raising the taxes.

Mayor Todd Kana told 4B members that he understood 4B money was intended for city projects, but he said, “look at what’s important – FM 1774.”

Council member Patsy Williams added that 4B money is the citizen’s money.

Zaiontz reminded council members that council was aware that they were receiving a $2 million loan.

Kana said the loan was an unexpected expense.

“We were prepared for it, but not for its size,” he said.

The taxes could rise as high as 66 cents per $100 valuation if the city had assumed the debt of the loan.

Kana said council plans to keep the taxes at the current rate of 49 cents per $100 valuation.

Kana also stated that in the coming years if the funds become available, council will re-evaluate the contract with 4B. He added that with the contract in place, he is confident the tax rate will remain the same.

The Magnolia City Council will hold a special city council meeting to approve the proposed budget and tax rate on Aug. 31 in the Sewall Smith Council Chambers on Buddy Riley Boulevard at 5 p.m.

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