Bonds

Bills seeking to restrict or expand municipal bond issuance and rein in debt practices are on the menu for Texas lawmakers during the legislative session that commenced in January and wraps up in late May. 

Numerous bond-related measures are among a record 8,153 bills and joint resolutions introduced in the Republican-controlled legislature by a March 10 filing deadline, according to the Texas Municipal League.

Some address controversial future and past debt sales, as well as bond elections.

House Bill 3899 and Senate Bill 1791 would require voter approval of bonds issued by local government-created corporations allowed to tap property tax revenue for specified projects. 

“This bipartisan bill is necessary in response to a new financing model undertaken by the city of Austin through the Austin Transit Partnership that would exploit a possible loophole in state law,” said Republican State Rep. Ellen Troxclair, sponsor of the House bill, in an email. “By using an indefinite property tax increase and planning to issue non-voter approved debt, the city of Austin has effectively created a blank check — one that’s about to be improperly signed by taxpayers.” 

Austin and its Capital Metro Transportation Authority created the partnership for a light rail plan known as Project Connect. Austin voters in November 2020 approved the use of property taxes to help fund the $7.1 billion project. A bond issue was not part of the ballot measure.

Troxclair, who represents suburbs and rural areas west of Austin, said if her bill is enacted into law, the city and the partnership would have to place Project Connect bond issues on the ballot. 

“Our hope with this legislation is to make it clear that in Texas, if you want to issue debt backed by the taxpayers, you have to follow the same transparency and ballot language requirements that are in state law that apply to all cities and counties,” she added.

In a recent newsletter, Austin Mayor Kirk Watson said forcing another election “would drive costs through the roof,” and perhaps give the federal government pause about helping to fund the project.

He also said expectations for the project have been recalibrated due to inflation and other factors and options for a first phase of affordable light rail will be presented at a community update Tuesday.

The project’s cost has ballooned to more than $11.6 billion as of last April, the Austin American-Statesman reported earlier this month.

SB 1810 targets tax anticipation notes by disallowing their use in lieu of bonds that were rejected for a project by voters within the preceding five years.

Amarillo pursued the issuance of $260 million of tax anticipation notes for a civic center project after voters in 2020 rejected bonds to fund various projects involving the complex. A local property owner’s lawsuit led to a district court rejecting Amarillo’s use of TANs.

The city appealed the October ruling in which the judge determined construction of a civic center was not a public work and thereby could not be financed with TANs.

Mayor Ginger Nelson said in November the appeal was necessary to clarify existing state law involving TANs.

HB 4082 may provide that clarification by listing the types of public works eligible for local government funding via TANs or certificates of participation, while explicitly prohibiting civic centers.

Bond elections, which are already restricted to May and November dates, would only take place in November when voter turnout is typically higher under HB 187 and SB 1609.

SB 2337 also calls for November bond elections, while requiring two-thirds voter approval for passage.

School districts in particular have been piling record amounts of bonds backed by property taxes on May and November ballots to accommodate growing student populations and replace aging infrastructure.

But schools would be restricted from issuing bonds unless they can demonstrate compliance with minimum safety standards at their facilities or plan to use bond proceeds to achieve compliance under HB 4050.

Several districts included safety projects in bond issues they placed on November 2022 ballots as the May 24 killing of 19 elementary students and two teachers in Uvalde, Texas, put a focus on door security, inadequate fencing, as well as emergency response communications.

SB 561 calls for debt issuance by local governments and school and other districts to purchase or lease tangible personal property to have maturity dates in line with the expected useful life of the property.
Other measures could expand or reduce bond issuance. 

SB 2070 would create a Utilities Reliability Fund to enhance the reliability and resiliency of the power grid, which has been strained amid high demand during extreme hot and cold weather, and allow the state’s Public Utility Commission to issue revenue bonds.

A proposed constitutional amendment, HJR 130, would create a water supply fund administered by the Texas Water Development Board, which issues bonds.

If the amendment is passed by voters, HB 10, which was designated a priority bill this session by House Speaker Dade Phelan, would authorize the board to finance via loans projects leading to the acquisition or creation of 7 million acre-feet of new water supplies by the end of 2033.

HB 3812 would create a Texas Infrastructure Fund with the state comptroller empowered to award grants to public or private entities for infrastructure projects that meet certain criteria, including reducing reliance on the issuance of state general obligation bonds. 

A supplemental state appropriation would help cover extraordinary costs incurred by Texas natural gas providers and electric cooperatives during 2021’s Winter Storm Uri in order to ease the financial hit to energy customers under SB 1501 and SB 1983.  A make-whole redemption was added to a recently priced $3.52 billion Texas Natural Gas Securitization Finance Corporation taxable bond issue in the event the state funding passes.

Local control of the Harris County Flood Control District, which issues debt and is presently governed by the county’s majority Democratic commissioners, would be stripped under SB 2431, which would rename it the Gulf Coast Resiliency District and have it run by a five-member board appointed by the governor with the consent of the Senate.

County Commissioner Adrian Garcia told Texas Monthly a state takeover of the district would be an overreach that county residents don’t need.

Democratic lawmakers introduced SB 1382 and HB 1091 in a long-shot attempt to repeal a 2021 Texas law prohibiting state and local governments contracts with companies that “boycott” the fossil fuel industry. UBS, which was one of 10 financial companies placed on the state comptroller’s list of boycotters in August, withdrew or was removed from bond deals as a result.

HB 1092 would repeal a similar 2021 law banning contracts with companies that “discriminate” against the firearm industry. That law led to Citigroup’s ouster as a muni underwriter for Texas bonds.

Meanwhile, Republican lawmakers want to expand the list of prohibited “economic boycotts.” HB 3399 would ban governmental contracts valued at $100,000 or more with companies deemed to be boycotting the fossil fuel, timber, mining, or agriculture industries or boycotting businesses that do not meet environmental or diversity standards. 

Articles You May Like

Laura Allen passes the GFOA baton
How the Saudis won back Biden
Nigel Farage’s Reform UK overtakes Conservatives in new opinion poll
Wells Fargo fires workers for ‘simulating’ being at their keyboards
The Labour party’s uncertain certainty dividend