On April 17 the Senate Committee on Intergovernmental Relations was in Houston to hear testimony regarding debt at a local level. Concern about the increases in local debt was expressed by members as staff with the Texas Bond Review Board told the committee that, based on prior issuance, at the end of 2017 – total tax supported debt will be $5k per capita. However, there were some other variables that should be taken into account when calculating those numbers, according to witnesses, including if the calculation contains any revenue supported debt, if it includes all entities paying down the tax debt, or the percentage of local public debt in comparison to growing state debt.
Each witness offering testimony during the discussion stated their support for debt transparency. The witnesses representing local governments cautioned that with so many variables in the debt calculations – tax supported debt vs revenue supported debt, etc – that current transparency measures are sufficient, especially in consideration of two transparency bills that were passed during the 83rd Session and authored by Sen. Ken Paxton (R-Plano).
During a discussion of capital appreciation bonds (CABs) and other types of obligations, most witnesses emphasized the need to have a variety of financial tools available to help complete their portfolio. Representatives from schools, counties and cities underscored Texas' exponential growth while noting a considerable downturn in state financial support for the needed and essential infrastructure.
Committee members sympathized and agreed that Texas is growing but some members questioned if local entities were choosing the most prudent financial instruments and making wise choices about how to address the needed infrastructure.
Sen. Larry Taylor (R-Friendswood) argued that public schools used the 2006 property tax cut as an opportunity to increase bond debt. He further told witnesses from fast growth school districts that he was agreeable to reconsider the state's "fifty cent test," a mechanism that restricts the ability of many school districts to issue bonds already approved by local voters, forcing those districts to utilize other financial tools. Sen. Taylor said he wants to see how those districts are spending their funds and if they are addressing needed educational items/facilities.
James Schiele, CFO of Eagle Mountain-Saginaw ISD in Tarrant County, offered his district as an example of prudent financial decision-making but one gradually being forced to consider different financial tools to pay for needed infrastructure.
All invited witnesses who addressed the topic of limiting bond election dates strongly argued against any move to a single uniform date that coincides with state general elections. Speakers noted that two year election cycles may cause unnecessary voter fatigue. Witnesses who spoke during public testimony emphasized the need for consistency among elections.
Committee Chairman Sen. Juan “Chuy” Hinojosa (D-McAllen) explained his concern of individual bonds adding up to a large tax burden for the citizens of Texas. Even though Sen. Hinojosa agreed that in general, costs were pushed down to local entities, he did not want to see this debt extended out to future generations.
Tom Currah from the Office of the Comptroller concluded testimony from invited witnesses. He presented information on local debt that agency has gathered and posted on its website. The Comptroller has collected debt data on every school, every city, and the one hundred largest counties. That website will be expanded to include all counties and special purpose districts. On April 23 the Office of the Comptroller announced that the site had indeed been expanded to include all counties.
Handouts from the hearing are now available for all HillCo clients with website access and can be found with the full client hearing report, which is also now available on the website.
