A petition with 59 signatures of registered voters was submitted to the city offices last week by councilman Dave Sutherland requesting the city put its proposed certificates of obligation plan to the voters.

According to City Administrator Ryan Kelley, a valid city petition in this case would need signatures of 5 percent of the registered voters.

The city is currently considering issuing $2.3 million in certificates of obligation to help the 4A Community Development Corp. pay its share of a new 27-acre park.

However, Sutherland has spoke out against the plan, asking instead that the issue be turned over to city voters for them to decide.

“This is not trying to stop progress or anti-park or downtown revitalization,” Sutherland said. “This is strictly if you’re going to do certificates of obligation, call for a vote.”

Through the proposed plan, the 4A Corp. would be responsible for payment on the CO’s. However, if 4A were to default on the loan, the responsibility would be left to the city to pay through ad valorem taxes.

“The people were very anxious to sign this petition,” Sutherland said. “When it comes to property taxes and water and sewer revenue, people want to be involved.”

The timing of the petition could potentially cause problems for the city hoping to plan a Fourth of July fireworks display at the park.

The petition was filed too late to be on the May ballot. However, according to City Administrator Ryan Kelley, Magnolia’s attorneys are talking with the Texas Attorney General’s Office to determine if the issue could be voted on in May.

Kelley also said the city could not hold a special election on the issue.

However, certificates of obligation are not the city’s only funding option.

Kelley explained that 4A and the city could nix the plans to use certificates of obligation and instead decide to utilize revenue bonds, which are funded by the city’s sales tax.

Sutherland believes revenue bonds would be the better funding option.

“4A has enough money to go with their original plan, which was revenue bonds on sales tax,” Sutherland said. “If they want to do revenue bonds, it might cost a little more to go that route, but they still have that option.”

In fact, it would cost the city upwards of $1.5 million in additional interests cost, Kelley said, if the city were to choose to utilize revenue bonds in the current market.

But Sutherland also believes going out for revenue bonds is a potential problem for the city. He cited a report from Coastal Securities, the city’s bond council, that stated “Financing for sales tax revenue bonds may be unacceptable under current sales tax conditions.”

“There is a possibility that we wouldn’t be able to sell the bonds,” Kelley said.

At press time last week, city officials were working with the Montgomery County elections office to verify the validity of the 59 signatures on the petition.

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