DALLAS — Voters in the Southwest could give the municipal bond market a $10 billion boost or a big brush-off Tuesday.
Coming a week after Colorado voters rejected a $3 billion injection of tax revenue into struggling school districts, voters in Texas, Arkansas, and Arizona will deliver their verdict on public finance of schools, college scholarships, water projects, roads, and a variety of local issues.
Natalie Cohen, senior analyst at Wells Fargo Securities, wrote in an election forecast that she and her associate Roy Eappen were reluctant to read too much into the Colorado results.
“Proponents of the tax increases were not well-organized or funded, so the argument goes,” Cohen wrote. “But that means the pro-tax advocates sprang up out of an independent but common experience across the state that services have been cut too far.”
Opponents of tax increases or debt for schools generally identify with the conservative Tea Party, while the more liberal protesters at Occupy Wall Street actions around the country are demanding more fairness from government and less favoritism for corporate and monied interests.
“Grassroots movements that are lightly organized, such as Occupy Wall Street, have a way of resonating with activists and voters,” Cohen wrote.
In Texas, where Gov. Rick Perry is aligned with the Tea Party and OWS rallies have developed in Houston, Austin and Dallas, opposition to the largest bond issues among 10 proposed constitutional amendments has been muted.
Proposition 2 would allow the Texas Water Development Board to issue additional bonds as long as no more than $6 billion are outstanding at any one time. The board has nearly exhausted its existing bond authority.
Prop. 2’s most controversial component is the fact that it allows the water board to continually issue bonds without seeking further voter approval, provided the $6 billion cap isn’t surpassed.
In a rapidly growing state that is suffering one of its worst droughts, Prop. 2 backers see the amendment as vital to the state’s economy.
Proposition 3 would authorize issuance of up to $1.86 billion of general obligation bonds to finance the long-standing Hinson-Hazelwood College Student Loan Program. The program provides low-interest loans to students who aren’t able to finance the full cost of college through other sources.
Under the Texas constitution, voters must approve additional bond authorization if the program is to continue offering loans.
Texas voters have approved student-loan bonds seven times in the past, but Prop. 3 is the first with an “evergreen” provision that functions like that in the Prop. 2 water bond measure. Thus, bonds can continue to be issued as long as the cap is not exceeded.
Proposition 4 would allow counties to issue redevelopment bonds backed by incremental property tax revenue growth from a redevelopment area. Under the state constitution, cities and towns can issue redevelopment bonds, but counties cannot. Prop. 4 would change that.
Proposition 6 would provide more funding for public education through accounting changes in the Permanent School Fund and State Land Board. It would also authorize up to $300 million a year to be transferred directly from the Land Board to the Available School Fund.
The Permanent School Fund is a trust managed by the State Board of Education to invest state land and mineral rights and distribute the proceeds to benefit Texas public education. Proceeds from the PSF are transferred to the Available School Fund, which then distributes the funding to school districts throughout the state. The Texas Constitution requires that no more than 6% of PSF investment returns can be transferred to the ASF and prohibits the PSF from distributing any proceeds if the principal of the fund falls below a benchmark.
Prop. 6 would allow the Land Board to transfer up to $300 million per year directly to the ASF instead of sending it first to the PSF.
As voters statewide are considering the PSF issue, those in 23 school districts will also decide local bond proposals totaling $1.75 billion.
Joe Smith, the founder of TexasISD.com and a former district superintendent, said the total is unusually low.
“It’s a very small number,” he said. “It’s about half of what we would expect to see on the November ballot.”
School bond requests totaled $2 billion in May 2010 and $2.5 billion in November 2010, but fell to $1.54 billion in May 2011, according to TexasISD.com. School bond elections in Texas may be held only in November and May.
The largest school bond election in Texas is a $399.4 million request by the North East Independent School District in San Antonio. School officials said more than 60% of the proceeds would be allocated to rehabilitation and expansion efforts at existing facilities. Other projects include $65 million for a new middle school and and $64 million for technology upgrades.
Trustees voted in April to present an identical bond proposal to voters in May but withdrew it less than two weeks later over uncertainties in state funding to local districts.
The Pasadena Independent School District near Houston is asking for $270.1 million of GO bonds to build its sixth high school and three middle schools, and replace five campuses.
Other elections include requests for $242.2 million by the Lamar Consolidated School District, $198.5 million by the Mansfield Independent School District, and $158.5 million by the Lake Travis Independent School District.
Non-school-related bond proposals include Travis County’s request for $214.9 million of GOs for roads, bridges, parks and other uses. Montgomery County is seeking a property tax hike to support $200 million of GO bonds for road projects in the county north of Houston.
In Arkansas, the only statewide item is a special election to renew a grant anticipation revenue vehicle bond program so the state can issue another $575 million supported by federal highway grants and a diesel fuel tax of 4 cents per gallon. The Garvee extension is on the ballot as a constitutional amendment because the bonds are considered state GOs, which must be approved by voters.
The original $575 million authorization from 1999 was exhausted by a $175 million sale in 2000, a $185 million one in 2001, and a $215 million one in 2002. Arkansas received premiums totaling $23.6 million on the bonds. Voters approved the initial 12-year bond program by a 4-to-1 margin in 1999, but soundly rejected an effort in 2005 to make it permanent.
In Arizona, voters will decide on dozens of mayors, council members, school bonds and overrides.
West Mesa’s Legislative District 18 also faces the first recall of a sitting state lawmaker in Arizona history. Powerful Senate President Russell Pearce, author of some of the state’s strict anti-immigrant laws, is running against political newcomer and fellow Republican Jerry Lewis.
After three straight funding cuts by the Legislature, school districts are hoping that voters in the financially hard-hit state will be willing to open the purse strings for their children’s education.
In Maricopa County, five school districts are proposing bonds and 13 are seeking overrides.
Paradise Valley Unified and Phoenix Union High School are seeking both bond approvals and overrides. Phoenix Union has the largest bond proposal at $230 million, followed by Paradise Valley at $203 million.
