Local NewsTaxes & SpendingBill to Curtail Non-Voter-Approved Local Spending Approved by Texas House, Eight Counties Exempted by Members

The bill that was once an across-the-board restriction on localities' use of non-voter-approved spending became substantially neutered on the House floor after amendments.
May 5, 2021
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Local governments in Texas have amassed over $22 billion in certain non-voter-approved debt. But legislation endorsed by the House on Tuesday would restrict that category of debt by tying it to the voter-approved rate.

“Certificates of Obligation” (CO) — the main component of government-issued debt at which this bill is aimed — were first written into law in the 1970s as a mechanism for emergency spending that couldn’t wait for the next ratifying election. They are still used for such expenditures as fire trucks or police cruisers. But they’ve also been increasingly used to finance fatuous projects such as San Antonio’s aluminum statue or Amarillo’s waterpark.

While not a superfluous expenditure, in 2019 Travis County Commissioners issued a CO to fund the construction of a courthouse that had been rejected by voters three years before.

Another function for which COs are used is to refinance existing debt — like a homeowner might do with their mortgage. Localities project they can save millions of taxpayer dollars on interest using this strategy.

But should House Bill (HB) 1869 make its way through the legislature, then COs will fall under the voter-approval property tax calculation. Last session, the year-on-year percentage property tax increase limit without voter approval was lowered from 8 percent to 3.5 percent for cities and counties.

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Different from its original form, HB 1869’s committee substitute provides more carve-outs for certain, specified debt. Any “bond, warrant, certificate of obligation, or other evidence of indebtedness owed by a taxing unit” that meets one of the specified categories is exempt from the voter-approved classification.

Those categories are self-supporting debt, or debt not paid for through property taxes; loans through a state or federal program; designated infrastructure; debt refinancing; and emergency spending.

Specifically designated infrastructure includes roadways, telecommunications or cybersecurity projects, and utilities-related equipment.

A few amendments were adopted on the floor that further expanded some of the exemptions, such as defining “designated infrastructure” to encompass school and hospital district facilities, equipment, rights-of-way, or land-related projects along with emergency service facilities and equipment.

Another amendment offered on Tuesday by Rep. Trey Martinez Fischer (D-San Antonio) exempted Bexar County from the bill’s restriction of non-voter-approved spending. The entire Bexar County delegation signed onto the amendment, and it was adopted with no objections.

On Wednesday during the final passage, more exempting amendments were tacked on for Travis, El Paso, Cleburne, Jim Wells, San Patricia, Bee, and Nueces counties as well as the City of Grand Prairie.

During the March committee hearing, representatives of localities voiced concerns about the original bill being too indiscriminate in tying all non-self-supporting debt under the voter-approval category. But the committee substitute appears to be an effort to assuage some of those concerns, especially by carving out debt refinancing.

Under the new language, San Antonio’s sculpture purchase would still fall into the voter-approval classification. That means any spending up to the 3.5 percent increase could be issued without voter approval but including the sculpture within that amount would come at the expense of other spending they might have otherwise included.

Supporters of the bill hope to constrict what localities can issue CO debt for, but it is substantially neutered from its original form.

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Brad Johnson

Brad Johnson is an Ohio native who graduated from the University of Cincinnati in 2017. He is an avid sports fan who most enjoys watching his favorite teams continue their title drought throughout his cognizant lifetime. In his free time, you may find Brad quoting Monty Python productions and trying to calculate the airspeed velocity of an unladen swallow.

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