Texas city seeks court validation for bonds

McKinney, Texas, is asking a state court to validate $30 million of sales tax-backed bonds that are being challenged by a conservation group.

A Transportation Infrastructure Finance and Innovation Act (TIFIA) loan structured as a McKinney Community Development Corp. taxable bond refunding would redeem bonds sold last year to help finance a project to offer commercial airline service at general aviation McKinney National Airport.

With the low-interest TIFIA loan, the savings over 30 years will total approximately $15 million, according to minutes from the March 3 McKinney City Council meeting.

The city's expedited bond validation petition filed in Travis County District Court follows a March lawsuit brought by the North Texas Conservation Association asking the Collin County District Court to stop the bond issuance because it would exceed the corporation's legal authority.

"Under Texas law, development corporation bonds must be backed by revenue generated from the project they finance," the group said in a statement. "In this case, the airport does not generate enough revenue to support the bonds. Instead, the proposed structure relies on sales tax dollars collected from the community."

In their answer to the lawsuit, development corporation and city officials said relevant state statutes "show that all actions being taken by the defendants with respect to the (2026 bonds) are permissible and do not violate the Local Government Code."

In July, work commenced on a $79 million airport project that includes a 46,000-square-foot terminal with four gates to serve 200,000 passengers annually and capacity to expand to six gates. Avelo Airlines, which would be the airport's first carrier, signed a five-year use and lease agreement in December.

A proposal to issue $200 million of general obligation bonds for the project was rejected by McKinney voters in May 2023.