DONNA, RGV – Before becoming city manager for Donna, Ernesto Silva managed the development of the Donna-Rio Bravo International Bridge.
In an in-depth interview with the Rio Grande Guardian, Silva said he remembers all the negative publicity there was about the cost of building the bridge and how it was an albatross around the neck of Donna taxpayers.
Silva is pleased to report that the public’s perception of the bridge is starting to change.
“There have been many comments about whether the bridge has actually had a positive impact on the community. If you look at the economic indicators you will see the economy is growing and people are bringing new businesses into the community,” Silva said.
Asked how much of this new business is due to the bridge, Silva said: “It is a combination of things. Maybe 50 percent is due to the bridge. People who cross buy fuel here, they eat here, they shop here. That is why we advertise so much in Mexico, on radio and TV, from Tampico to Saltillo. We are primarily targeting people from Mexico and how conveniently situated we are, so close to the Reynosa airport.”
Silva points out it is much cheaper to fly to Cancun from Reynosa than it is from McAllen, Harlingen or Brownsville. “We are going to have a Mexican bus company here soon, taking passengers from our bridge to the Reynosa Airport. And Valley Metro will soon be operating on this side. We think we can do a lot of business related to the Reynosa Airport. Park your car here and get the bus to the airport. It is only 15 minutes away.”
Workshop retreat
At a workshop retreat held last Friday at La Copa Inn on South Padre Island, Donna city staff and city commissioners watched a power point presentation from Silva on how city finances have been turned around and how profitable the city’s bridge has become – and all of this before commercial trucks have even started to cross.
“So much of our growth is due to the bridge. If we get 1,800 vehicles per day that can generate about $2.3 million per year, from southbound traffic. Obviously, we do not get any toll revenues from those vehicles crossing northbound but those are the people coming to shop in Donna. Our population is about 24,000. Thanks largely to the bridge, every day our community grows about 12 percent a day. That is based on one person per car. That is a big amount,” Silva told the Rio Grande Guardian.
The Donna Bridge opened in 2010. Construction started in 2007. It cost $30 million to construct. In 2010, bridge expenditures and revenues were about the same. Expenditures were at $696,425.00 and revenues were at $604,979.01. Expenditures reached a peak in 2013-14, hitting $1,132,002.00. At that point, revenues were at $1,637,336.87. The following year, revenues had reached $1,690,594.54, with expenditures dropping sharply to $536,011.00.
In 2016-17, the hours of operation will increase, with the bridge opening at 6 a.m. each day and closing at 12 Midnight. Expenditures are projected to increase to $878,967.00 with revenues projected to increase to $2,044,000.00. In 207-18, the tolls are expected to go up, from $3.50 to $4.00 per vehicle. For this reason, revenues are projected to increase sharply, reaching $2,518,500.00, with expenditures remaining steady at $905,336.00. And again, none of this factors in the introduction of commercial trucks, which are on the horizon.
In his interview with the Rio Grande Guardian, Silva spoke in depth about the “critical” situation Donna was in a few years back, due largely to the decision to construct the bridge.
“The city was told from the get-go that the first five years would be the most critical. To make it worse, when the federal government decided to phase in commercial trucks, we told them, well, now you have to take the revenues that would be generated from the commercial and deduct that from the projected revenues for the project.
“We told them, you will have three years of capitalized interest, which means that the payments on the bridge were being paid from the bond proceeds. They were set aside for three years, so the city would not have to put up any of its money. The other important factor was that the city did not have a rating, therefore it was like selling junk bonds. So, we had to go out and purchase insurance and private place the bond for the bridge. So, the $30 million bond was privately placed at an interest rate of six percent, which is a lot of interest.”
Silva said the City of Donna is now in the process of refinancing those bonds. “When we refinance the bonds here soon that will be about a $600,000 to $800,000, depending on the pricing. When we finally sell the bonds, but the city will save between $600,000 to $800,000 a year on their bond payment. That is going to happen within the next 45 days.”
Silva said this fluctuation in financial fortunes was structured from the very beginning.
“The bonds were sold in 2007. We purposely had a call date in 2017 so that we could do a refinancing in 2017. All along we had told the city, the first five years are going to be the most critical. So, we are going to give you three years of capitalized interest, then you have two more years to get commercial trucks.
So, by year five the plan was to have commercial trucks. We are in the fifth year of operation. We are about to get southbound empties and we are going to get the northbound empties. Eventually the loaded trucks will be here. We told the city that within five years you will have a Walmart or a Target or somebody moving into the community. Well, four and a half years later they have their Walmart.”
Silva said being upfront with city leaders and being fiscally conservative has paid dividends.
“All along we were very careful but we told the city exactly what was going to happen and why we had to do the call date ten years out. We knew we were going to refinance the bridge from the get go. But, it was not because we did not think the bridge was a good project. It was because the city did not have good financials. They could not go out and sell bonds and get a four percent. They had to private place the bond at 6.5 percent,” Silva said.
“Back then, in 2007 when construction started, the city was financially strapped and we were going to place a $30 million debt on the community. However, if they did not invest the community was going to continue on a downward spiral because they did not have a single project that was going to generate additional revenues for the city, there was no major economic development in the pipeline.”
Now, the picture looks much rosier, Silva said.
“If you look at the results of the economic indicators you will see that from 2010, the day the bridge opened, from that date going forward, the community has continued to grow. The economy has continued to grow. There have been more revenues, there has been more investment. If you look around there are a lot of new plazas, a lot of new doctors. And, here shortly we hope to make some announcements about some new plazas that are coming into the community.”
And then there are the trucks.
“Once the trucks come in the financial outlook is going to improve dramatically because all of the projections I have provided you, none of them show trucks as part of the scenario. So, this is the worst case scenario, which looks pretty good. If you get the trucks, and you add the truck crossings and revenues and the impact they have on the economy, then outlook is going to be tremendous.”
Asked what the timeline for commercial trucks is, Silva said: “We hope to have southbound empties this year, northbound empties in 2017 and fully loaded by 2018. The Mexican government will allow southbound empties first, as long as they know they have a start date for northbound. That is what is being negotiated right now. Hopefully we will have an announcement in June and we will have construction started and empty trucks crossing soon. We will push forward to submit another application for loaded trucks in 2018. That is our goal.”
Editor’s Note: This is the second in a three-part series on the City of Donna and how it turned around its financial fortunes. Click here to read Part One.
