Sen. Kevin Sparks’ (R-Midland) Senate Bill (SB) 1810 restricts the conditions necessary for a local government to issue a Tax Anticipation Note (TAN) by forbidding it within five years of voters rejecting the project; requiring its fiscal note to be no more than 5 percent of the local government’s outstanding debt total; or if 5 percent of the locality’s registered voters sign a petition opposing the issuance.
“Texas has one of the highest local bond indebtedness in the country, third to only New York and California,” Sparks said in a release. As of the end of 2022, Texas local government debt amounted to $417 billion — $14,000 per citizen.
It’s part of a three-bill package on local government debt, the other two of which require bond elections to be held on the uniform November election date, and for lifespan of passed bonds to be less than the “useful life” of the project they’re financing.
“Unless we do something to change course, Texans will continue to be mired in debt,” Sparks said. “This bill package seeks to reverse course to put Texas on a path of long-term sustainable growth, and I look forward to passing these bills for the good citizens of Senate District 31 and the whole state.”
A TAN is a public finance mechanism that acts as a bridge loan, a way for a locality to bridge the gap between incoming revenues. It was not intended to finance capital expenditures.
Amarillo’s city council voted last year to issue the TAN — the largest in the state’s history by a wide margin — to finance the construction of a new civic center, two years after the city’s voters rejected a $275 million bond proposal for the same project. The city’s plan was to issue the TANs and then refinance the debt incurred through Certificates of Obligation — another non-voter-approved debt mechanism local governments use that’s been criticized and curtailed by the state Legislature in recent years.
The council argued that the civic center project needed to be completed, especially before costs for construction rose again.
After approving the maneuver, Amarillo was sued by businessman Alex Fairly, for whom a court ruled in favor back in October.
Notably, Judge Bill Sowder did not rule the use of TANs for this purpose improper, but rather found that the city failed to provide sufficient public notice.
While the case was still under consideration, Fairly took the issue to the public square.
He testified in front of House and Senate committee hearings last year, during which a legislator remarked, “This is the most egregious abuse of Texas financing law that I’ve ever seen in my long career.”
The issue was brought up during a Texas Public Policy Foundation policy summit last week, where Reps. Morgan Meyer (R-Dallas), Ellen Troxclair (R-Austin), and Hugh Shine (R-Temple) each criticized Amarillo’s TAN use.
Meyer chairs the House Ways & Means Committee, through which any restriction must pass.
Of Sparks’ bill, Fairly told The Texan, “I believe this 3-layered bill provides a fair but thorough barrier against future attempts to do what Amarillo’s Council attempted.”
“I’m excited to see this bill introduced, and appreciative that Senator Sparks is leading the way. Even though the lawsuit succeeded, their nearly-successful attempt to bypass voters with the largest Tax Note in Texas history demands a strong response from responsible Texas legislators.”
Amarillo Mayor Ginger Nelson did not return a request for comment by publishing.
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Brad Johnson
Brad Johnson is a senior reporter for The Texan and 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.
