City reviews billion-dollar debt outlook

As Laredo prepares for another major budget season, city financial advisers have told councilmembers that maintaining strong credit ratings and stable revenue streams will be critical as the city moves toward hundreds of millions of dollars in infrastructure borrowing.

Financial adviser Noe Hinojosa of Estrada Hinojosa & Co. recently presented a broad overview of the city’s debt portfolio, revenue systems and long-term borrowing capacity as officials continue preparing the fiscal year 2026-27 budget expected later this summer.

Much of the discussion centered on how the city plans to finance major projects tied to international bridges, water infrastructure, airport improvements and other capital needs while preserving investor confidence and avoiding major impacts on taxpayers.

“The cost of borrowing is a lot lower because of the fact that you are a respected entity and know how to keep your finances in order,” Hinojosa told LMT.

According to Hinojosa, Laredo currently maintains strong investment-grade credit ratings of Aa2 from Moody’s and AA from Standard & Poor’s for its general obligation debt. Hinojosa noted only a handful of Texas cities currently hold the highest AAA ratings.

The city’s overall debt portfolio now exceeds $1 billion across multiple systems, including general obligation debt, water and sewer debt, international bridge debt, and sports venue sales tax debt.

Despite the size of the obligations, Hinojosa repeatedly emphasized that Laredo remains in a comparatively stable position because many of the city’s largest debt obligations are backed by dedicated enterprise revenues rather than solely property taxes.

The international bridge system has emerged as one of the largest focal points as city leaders continue discussing bridge toll increases tied to planned expansion projects.

According to Hinojosa, the city expects approximately $240 million in bridge-related capital needs over the coming years, including major expansion work at the World Trade Bridge and Colombia Solidarity Bridge.

The proposal outlined roughly:

• $180 million in financing for bridge expansions.
• $35 million for modernization and capital improvement projects.
• Another $25 million for toll system upgrades and next-generation revenue collection technology.

The bridge system generated approximately $86 million in projected revenue for fiscal year 2025, with roughly $64.7 million remaining available for debt service after expenses.

Debt coverage ratios tied to the bridge system remained well above required minimum thresholds throughout the long-term projections presented to City Council.

Hinojosa said investors closely monitor those ratios when deciding whether to lend money for large infrastructure projects.

“You have to have investment made by investors to lend us the money to do those improvements,” Hinojosa said. “The city fortunately enjoys a very competitive advantage over many border crossings all over the country.”

He pointed to Laredo’s role as the nation’s busiest inland port as a major factor supporting the city’s long-term borrowing outlook.

“Laredo is recognized as the No. 1 port of entry, and it’s not by coincidence,” Hinojosa said. “We happen to be right where it matters.”

The bridge financing discussion comes not long after city leaders delayed moving forward on a proposed multiyear bridge toll increase plan following pushback from trucking industry representatives and some councilmembers.

The city’s water and sewer system currently carries more than $550 million in outstanding debt, though advisers said coverage ratios and enterprise revenue remain stable.

Hinojosa said Laredo’s continued population growth and expanding trade economy are increasing pressure on existing infrastructure systems.

“We need water pipelines being restored. Some people are talking about secondary water sources, water capacity, sewer capacity,” Hinojosa said. “That infrastructure needs investment.”

Airport improvements were also discussed as part of the city’s broader capital outlook.

“There are some assets that need to be replaced,” Hinojosa said. “The airport continues to be growing and now it’s our turn to make some needed investments.”

Hinojosa compared Laredo’s debt metrics, tax rates and financial standing against 25 similarly sized Texas cities.

The charts showed Laredo ranking comparatively well in several categories, including total debt burden, debt per capita and tax-supported obligations relative to taxable value.

City officials also noted taxable property values continue rising locally, with assessed values projected near $26.5 billion for fiscal year 2026.

Still, city leaders acknowledged during the broader workshop that financial pressures remain significant heading into the next budget cycle.

Officials have already identified rising employee health insurance costs, capital improvement demands and long-term infrastructure obligations as major challenges likely to shape the upcoming budget process.

City Manager Joe Neeb said the prebudget workshops are intended to give councilmembers and the public a clearer understanding of how different financial decisions affect one another before the full budget proposal is formally introduced in August.

“There’s so much data that is moving back and forth and adjusting,” Neeb said. “If you move one thing, it changes another.”

No formal action related to borrowing or bond issuances was taken during Thursday’s workshop, though several of the financing discussions are expected to return during budget meetings throughout the summer.

Hinojosa said the city’s long-term financial strategy ultimately depends on balancing infrastructure investment with maintaining financial discipline.

“We’re working very diligently with city staff to make sure that we take care of those needs,” Hinojosa said. “But at the same time, we have to protect the city’s financial position.”