DALLAS — Dallas can ask voters for $600 million of new general obligation debt in November without raising the tax rate under revised projections outlined Wednesday to the City Council.
The city had been preparing for an election in November for $500 million of bonds, but city manager Mary Suhm said a new analysis provided a higher ceiling.
A bond package of $600 million would not require an increase in property taxes or fees, she said.
“We see refunding opportunities, we see a favorable market, and we anticipate higher property valuations,” Suhm said at the agenda briefing session.
“I’m very conservative in my revenue projections,” she said.
Higher property values should raise the capacity for the 2012 bond package by $15 million, Suhm said, with another $125 million realized by refunding existing debt and getting lower interest rates earlier than expected.
The capacity is reduced by the $25.5 million of certificates of obligation authorized by the council last week for improvements to the city-owned Cotton Bowl stadium.
Dallas has $1.66 billion of outstanding GO debt rated Aa1 by Moody’s Investors Service and AA-plus by Standard & Poor’s. Other outstanding debt includes $1.8 billion of water utility revenue bonds and $480 million of Build America Bonds supported by revenues and taxes from the convention center hotel. Voters approved $1.35 billion of GO bonds in 2006.
The City Council will receive Suhm’s recommendations on what to include in the 2012 package on June 6, she said.
“We will recommend repairs to infrastructure that will reduce our operating costs, and we will recommend investments in infrastructure that will support the city’s economic development,” Suhm said. “We will not recommend projects that add staff or operating dollars.”
Dallas could seek another bond package in three to four years if the economy continues to improve and property values continue to increase, Suhm said.
Chief financial officer Jeanne Chipperfield said 32.5% of property tax revenue is devoted to debt service in the current budget, and that would not increase if a $600 million package is passed in November.
If voters approve the GO bonds, Chipperfield said, the debt would be issued as 20-year bonds with level principal payments. That results in a payout of 50% of the principal over 10 years, with a drop in debt service each year.
The city anticipates a refunding in October, she said.
Jerry Allen, chairman of the council’s finance committee, said the city must ensure that future debt service requirements don’t take up more than the current share of property tax revenues.
“That debt service level is the key to the whole thing for me,” Allen said.
Suhm cited a Moody’s report that noted Dallas had an “elevated yet manageable debt profile.”
“That is a sign to me that we are OK but not to take it any higher,” she said.
More than $320 million of the proposed 2012 package would finance a single large drainage project east of downtown. Several creeks in the area were paved over in the 1930s and can cause severe flooding.
The council is expected to approve a project list June 20 and call the November election in early August. If the bonds are approved, work on the projects would begin in March 2013.