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Billions on Bond Ballots in Southwest

NOV 5, 2012 2:42pm ET
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DALLAS – While the nation’s voters await the results of the presidential election Tuesday, state and local governments across the Southwest share anxiety about the outcome of billions of dollars of tax and bond propositions.

In Texas alone, more than $4 billion of bond proposals will be decided, including a record $2.7 billion of city, public school and community college bond packages in greater Houston.

The largest component of that debt would be $1.9 billion for the Houston Independent School District, a proposal that earned support from 54% of those polled by a team of researchers from the University of Houston and Rice University.

Despite concern that such large amounts of debt might be rejected on a long ballot of candidates, researchers said the ongoing recovery tends to favor the bonds this year.

“Voters in Harris County are very bullish on the economy,” said Rice University professor Robert Stein, who led the poll with University of Houston professor Richard Murray. “Bonds are more likely to pass in high-turnout elections.”

According to the poll, “more than two-thirds (69%) of HISD voters believe ‘things in Houston are on the right track,’” researchers wrote. “District voters are optimistic about their family’s economic future. Almost half (47%) of the district voters believe their family’s financial situation will be better over the next 12 months. This figure is up 12 percentage points from the May/June survey.”

An expansionist mood colors many of the bond proposals in the region, including an Austin vote on raising tax support for a proposed medical school alongside the city’s $385 million bond package.

A continuing economic recovery is expected to help cities pass bond proposals, regardless of whether it helps President Obama win re-election.

In Dallas, a 2% increase in the Dallas property tax base in fiscal 2012 gave City Council enough headroom to ask voters on Tuesday for $642 million of GO bond authority without raising the tax rate. The council had initially considered a $500 million bond request in late 2011 with no new taxes, and raised the estimate to $600 million in April. The $642 million bond package was approved by the council in August. Dallas voters approved $1.35 billion of GO bonds in 2006.

In far west Texas, El Paso is asking for $473.3 million of general obligation bonds in a “quality of life” referendum that includes $245 million for park and zoo projects and $223.3 million for a downtown multi-purpose event center as well as library and museum upgrades.

Voters will also be asked to increase the city’s hotel tax by 2% to 17.5%, the highest rate in Texas, to support $15 million of tax-exempt bonds and $35 million of taxable debt for the public-private stadium project.

El Paso City Hall will be demolished to make room for a downtown minor league baseball stadium to be financed with the hotel tax revenue.

Voters in the coastal Texas city of Corpus Christi will decide on $89.7 million of general obligation bonds in an eight-part referendum.

Denton, north of Dallas and Fort Worth, is seeking a $20.4 million GO bond authorization. The proposal includes $20 million for upgrades of existing city streets and $400,000 for public art related to an expansion of Interstate 35 through the city north of Dallas.

In Arizona, supporters of a measure to continue a temporary sales tax to support education are hoping that the recovery is strong enough to bolster support. The Arizona Sales Tax Renewal Amendment, also known as Proposition 204 or the Quality Education and Jobs Act, would renew a 2010 voter-approved one-cent sales tax to provide funding for education.

In the Phoenix suburb of Glendale, city officials are hoping that voters will allow a tax measure to survive, even though revenue would go toward what many residents consider a mistake. The initiative, placed on the ballot through a petition drive, would reverse a 0.7% sales tax increase City Council approved to be used for municipal operating costs, including a $17 million arena management payment to a likely buyer for the National Hockey League’s Phoenix Coyotes.

The city has voted to subsidize a new owner of the team if it will continue to play games in the city owned $180 million bond-financed Jobing.com arena.

In Arkansas, voters face two constitutional amendments with debt implications.

Issue No. 1 is a 10-year, 0.5% increase in the state sales tax rate to support $1.3 billion of general obligation bonds for highway projects.

Proceeds from the road bonds would finance construction of a network of four-lane state roads between major cities and add capacity to existing highways.

The additional revenue would also provide a total of $700 million over its lifetime for local transportation efforts, to be split equally between cities and counties. Cities are allowed to issue bonds supported by their share of the revenue, and counties are expected to seek similar authorization from the 2013 General Assembly.

The temporary increase would bring the state sales tax rate to 6.5%.

Scott Bennett, director of the Arkansas Highway and Transportation Department, said the $1.3 billion of bond proceeds and the other revenue would finance a $1.8 billion highway program.

Madison Murphy, chairman of the Arkansas Highway Commission, said the current highway funding system that relies on revenue from motor vehicle taxes is outmoded and inadequate.

Murphy is co-chair of the Move Arkansas Forward Committee, an advocacy group that supports the road bond proposal.

The state has $20 billion of highway needs over the next 10 years, Murphy said, but only anticipates $4 billion in revenues from current taxes.

“This is a long-term obstacle to better highways because fuel consumption that contributes to highway revenue is flat or declining,” Murphy said.

Arkansas Issue No. 2 would authorize sales tax revenue bonds.

Patterned upon a similar program in Kansas, the STAR bonds would be supported by the local sales tax revenues generated in a development district designated by a city or county. The economic development proposals would have to be approved by the state before the local district could issue STAR bonds.

Local governments would also be allowed to issue STAR bonds to retire unfunded liabilities of closed local police and fire pension systems that otherwise would face insolvency. Voters would have to approve the tax increase supporting the bonds.

In Colorado, an estimated $926,860 has been raised by campaign committees that support passage of bond issues and operating tax increases in 22 school districts, according to the nonprofit Public Education and Business Coalition.

This year, 30 districts are proposing 37 bonds and overrides, including four of the state’s largest districts.

Proposals by the Aurora, Cherry Creek, Denver and Jefferson County districts account for $664 million of the $1.03 billion being requested by districts statewide. Campaign committees in those four districts have raised $736,523 of the $926,860 total, which is based on campaign finance reports filed with the secretary of state’s office as of Oct. 16. Aurora is seeking a property tax rate override for operating expenses; the other three districts all are proposing bond issues and overrides.

Only $7,775 has been raised by the three opposition committees registered this year, two in Jefferson County and one in Denver.

Municipal bond firms, construction companies and architects are among the largest contributors to the campaign funds, according to PEBC.

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