Which of these must give approval in order for texas to increase its bond debt?

In addition, the county is required to post a copy of the order calling the bond election at each polling location in the county as well as three public places in the county and on the county website.

1. Texas counties must prepare and publish an annual report on the county’s bond or other debt obligations. The requirements for this report are stated in Section 140.008 of the Texas Local Government Code. The annual report must set out detailed information about the county’s debt obligations on the county’s website along with contact information including the county’s physical address, mailing address, main telephone number, and an email address.

8.     GO bonds fall into two categories.

Unlimited Tax Bonds. This type of bond tells the bondholder that regardless of circumstance (i.e., an unexpected catastrophe), the county will tax whatever amount necessary to pay the money back, subject to the 25 percent assessed valuation limit.

Limited Tax Bonds. Most GO bonds (as well as certificates of obligation, tax notes, and contractual obligations) are Limited Tax bonds. This tells the bondholder that the county is subject to the 80 cents per $100 valuation limit under Article VIII, Section 9 of the Texas Constitution on the amount of taxes that can be pledged to pay the debt.

The City funds its Capital Improvements Program in several ways. One way is through voter-approved General Obligation (GO) bonds. GO bonds give cities a tool to raise funds for capital improvement projects that are otherwise not funded by City revenue, such as roads, bridges, bikeways and urban trails and parks. As a result, GO bonds are typically used to fund capital improvement projects that will serve the community. If voters approve a bond proposition on an election ballot, the City is authorized to sell bonds up to the amount indicated in the proposition language to fund capital improvement projects that meet the public purpose of that bond proposition. For example, in November 2012, voters approved City of Austin Proposition 14, allowing the City to borrow up to $77,680,000 to fund parks and recreation projects.

GO Bonds are backed by the full faith and credit of the City of Austin. This means the City is obligated to pay back the bonds by pledging its ad valorem taxing power, or in other words its ability to collect property taxes, to repay the debt.  

The property tax rate is composed of two parts: the Operations and Maintenance rate (O&M) and the debt service rate. The debt service rate is set in order to generate the revenue necessary to make the City’s payments for tax-supported debt. The 2014 fiscal year debt service rate is 11.71 cents for every $100 of assessed property value.

Bond debt can be compared to a home mortgage that is repaid over time, while O&M expenses are like the daily household expenditures that are paid for immediately, such as groceries. Like buying a house, major capital improvement projects, such as park or library improvements, have a long useful life, so their cost is spread out over many years and paid for by current and future citizens who use them. The debt is typically financed over a 20-year period.  

When voters approve bond propositions, the City does not issue all of the debt immediately. Instead, debt issuances are spread out over several years according to the annual spending needs of the bond program. By monitoring the annual spending needs and not issuing all the debt at one time, the City can keep the debt service tax rate more stable from year to year.

Examples of 2015 CO issuances include $67 million issued by the city of Abilene for extensions and improvements to its water supply, and $60 million issued by Williamson County to fund construction of new buildings and renovations to existing structures for the Sheriff’s Office and the county’s emergency medical services. Health and hospital districts, by contrast, issued no certificates of obligation in 2015.

Pros and Cons

Many Texans, including legislators, are concerned about rising levels of local debt. According to BRB, Texas ranks second-highest among the 10 most populous states for per-capita local debt. Certificates of obligation, unsurprisingly, have come under considerable scrutiny in recent years.

As noted previously, proponents tout the flexibility CO bonds afford local officials in responding to critical and emerging public needs, allowing them to act without having to wait for — or pay for — an election. And unlike general obligation bonds, a single CO can be issued to support more than one purpose or project, reducing the cost of issuance.

Local governments often use COs to refinance or reduce interest rates on existing debt, enjoying substantial savings. At times, they can help reduce costs in other ways.

The city of Denton, for instance, began issuing COs to fund utility system projects in 2010, in response to the collapse of the municipal bond insurance industry following the 2008 financial crisis. Denton had previously employed revenue bonds for utility projects, repaying the bonds with revenue from utility payments. Without bond insurance, however, Denton would have had to pay a far higher interest rate on the revenue bonds. Bryan Langley, Denton’s assistant city manager, says the city’s use of COs rather than revenue bonds between fiscal 2010 and 2016 saved it more than $2.3 million in interest costs, an amount it subsequently dedicated to street improvements.

Opponents, on the other hand, say COs allow local officials to burden taxpayers with long-term, tax-funded debt without adequate citizen input or approval, and that the ability to fund multiple projects with a single CO issuance is confusing and disguises public indebtedness.

They also point out that the provision requiring at least 5 percent of voters to petition for an election on CO debt is a significant hurdle in metropolitan areas.

New Limitation on CO Powers

Opposition to COs came to a head a few years ago in Montgomery County, north of Houston. In 2012, the Montgomery County Commissioner’s Court issued $30 million in COs for a road project in Conroe, less than a year after voters rejected a $200 million bond proposal including the same project.

As a result, area citizens pressed for legislation to curtail their use, culminating in 2015’s H.B. 1378, which prohibits the issuance of COs for any project voters rejected in the preceding three years. Exceptions include a “public calamity” that threatens property or public health, or the immediate need to comply with a state or federal regulation, rule or law.

It’s probably too soon to weigh the impact of H.B. 1378, which took effect in January 2016. But regulators have reported that local officials seem to be using more specific language in general obligation bond proposals, to preserve their ability to issue CO bonds for related projects in the future. For example, instead of a GO bond proposal for “city center street improvements,” the proposal might specify the streets to be improved, so that if voters reject the GO bonds, COs still can be issued for other street projects in the city center.

According to the BRB, CO issuance has risen by 19 percent since January 2016. CO issuance varies widely from year to year, however, and it’s unclear whether the new law has had any effect on the frequency of CO issuance.

Other states have considered similar action to regulate debt issuance without voter approval. North Carolina’s Senate Bill 129, passed in 2013, caps statewide non-voter-approved debt at 25 percent of the state’s total bonded indebtedness. In New York state, which carries the nation’s largest state and local per-capita debt burden, lawmakers proposed a bill that, if approved, would have required voter approval for all new state debt, with only limited exceptions.

In addition to H.B. 1378, Texas lawmakers have proposed a variety of other changes to CO law, including restrictions on the kinds of services that can be purchased with COs and changes to the requirements for notice of intent to issue COs. Similar bills may reemerge in the upcoming legislative session, as the movement toward greater financial transparency grows. FN

What entity must certify the Texas budget?

What are general obligation bonds for the state of Texas?

Which of the following officials certifies that the Texas budget is balanced?

What are certificates of obligation in Texas?