Houston-area flood-bond vote comes amid steady recovery

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DALLAS – As voters in Harris County prepare to vote on a $2.5 billion flood bond proposal on the anniversary of Hurricane Harvey’s landfall in Texas, areas hardest hit by the storm are rebounding well, according to credit analysts.

“Most affected local governments continue to experience tax base growth and maintain credit quality,” Moody’s Investors Service analysts Ray Ousley and Adebola Kushimo wrote in a Tuesday report. “Sales tax revenue has also increased, partly due to rebuilding after the storm.”

Moody’s examined preliminary tax base data for nine of the 13 counties most impacted by the storm and found that all nine showed an increase in fiscal 2019 assessed value.

“In many cases, the growth is likely due to investment in new construction even with the disruption from the hurricane,” the analysts said.

Moody's Analytics also found that population has continued to increase in the Houston metropolitan statistical area with a projected 1.9% growth rate in 2018. The affected areas also received significant federal government aid to help with recovery and most had healthy economies prior to the storm.

On Saturday, voters in Harris County, which includes Houston, will vote on $2.5 billion of bonds that Harris County commissioners wanted on the ballot on the anniversary of Harvey’s landfall.

Harris County Judge Ed Emmett called the referendum the most important local election in his lifetime, while acknowledging that a tax increase would be required to support the bonds.

“Based on a likely borrowing schedule over approximately 15 years, the Harris County Budget Management Department estimates that the overall tax increase would be no more than 2-3 cents per $100 of assessed home valuation – meaning that most homeowners would see an increase of no more than 1.4% in their property tax,” Emmett said in a prepared statement. “Because of county property tax exemptions, homeowners with an over-65 or disabled homestead exemption on a home assessed at $200,000 or less would pay NO additional taxes for these bonds.”

In deciding to call the election, commissioners said the county needed to be ready to match federal funding, when it becomes available, with local debt for maximum effect.

The National Oceanic and Atmospheric Administration estimated that Harvey caused $125 billion in damage, the second costliest storm in U.S. history behind the $161 billion in damage inflicted by 2005's Hurricane Katrina that flooded New Orleans.

Despite widespread flooding and destruction one year ago, Harris County’s assessed property value has increased 2.8% since then, according to Moody’s, which rates the county Aaa with a stable outlook.

Houston's assessed value has increased 2.1% to $234.1 billion, according to preliminary 2019 data. That is down from 2.9% growth in fiscal 2018.

Port Arthur's fiscal 2019 value is flat, according to final data. The city, in Jefferson County about 100 miles east of Houston, was the only one Moody’s downgraded in the wake of Harvey. It continues to face relatively narrow liquidity and challenges related to storm damage.

The state’s largest school district, Houston Independent School District, has seen its tax base grow. HISD earlier this year was facing a possible state takeover because of poor academic performance at 10 schools. However, latest test results showed sufficient improvement to spare the district loss of its autonomy. The district was also subject to leniency in the wake of Hurricane Harvey.

Property tax values for most of the municipal utility districts in the region suffered little damage due to proper land-use planning, Moody’s said. Only one MUD was downgraded and is likely to see its assessed value decline, analysts said.

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Bond elections General obligation bonds Hurricane Harvey Harris County Texas