Well-received Texas bond measures will add $11 billion to the market

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DALLAS – Voters across Texas approved a record $11 billion of bonds on local ballots Nov. 7 or better than 91% of the more than $12 billion proposed, according to totals reported by the Texas Comptroller’s Office.

Slightly more than $1 billion of proposals were rejected, according to the Comptroller’s tally.

Last week’s proposals, which included $1 billion of pension bonds for the city of Houston, were about $3 billion higher than the previous record in November 2015.

Dallas, which had to delay its bond election from last May due to unresolved problems with the Dallas Police and Fire Pension Fund, won overwhelming voter support for its $1.05 billion of bond proposals.

“Given both cities' recent efforts to curb pension liabilities, the increased debt will affect overall liability burdens, the sum of direct debt, overlapping debt and unfunded pension obligations as a percent of resident personal income,” said Fitch analyst Robert Rowan.

Houston’s plans to issue pension bonds before the end of the year should be credit neutral, Rowan said.

“The voter-approved pension obligation bond will shift a portion of the overall burden from the net pension liability to the city's direct debt total,” Rowan noted. “When coupled with pension reform, as in Houston, Fitch views issuance of pension obligation bonds as credit neutral.”

In addition to the pension measure, Houston voters approved nearly $500 million in bond authorizations for public safety, parks, public health and libraries. This amount is minimal compared to current Fitch-adjusted long-term liabilities of more than $20 billion.

Dallas delayed its bond election last spring so that it could deal with pension reform, fearing that voters would not approve any new debt until growing pension obligations were dealt with.

In the 2017 Texas Legislature, the city won lawmakers’ approval for a legislative package that included reduced benefits and increased employer and employee contributions for its Police and Fire Pension plan. Dallas participates in three single employer defined benefit pension plans. In fiscal 2016 the combined Fitch-adjusted ratio of assets/liabilities was even lower than Houston, Rowan said.

Although only about 6% of registered voters cast ballots in Dallas, the 10 bond proposals were easily approved. Bond proceeds will be used for a variety of projects including streets, libraries, public safety facilities and parks.

“Fitch views the city's efforts to control pension obligations as meaningful to the long-term sustainability of its liability burden,” Rowan said. “The additional debt likely will not materially change the liability burden given the current rapid rate of debt repayment and expected personal income growth.”

Another large measure that won approval was the Austin ISD’s $1.05 billion bond package designed to keep up with growth and aging infrastructure.

The final unofficial results showed 66,512 votes cast, with 72% of Austin ISD voters in favor of the bond and 28% against.

In nearby Leander ISD, one of the fastest growing in the state, voters approved $450 million of bonds to the relief of school officials who watched a similar-sized bond proposal in neighboring Round Rock ISD go down to defeat last May.

The largest losing proposal came from the Ector County Independent School District in Odessa, heart of the oil-producing Permian Basin region. There voters rejected $291.2 million of bonds by a decisive margin, with more than 61% opposed.

The fast-growing district needed the bond funds to alleviate crowding, proponents said. The district has about 32,000 students. In addition to the bonds, the ballot sought a tax increase that would have raised the $1.15 per $100 valuation to $1.45.

The bond issue included lifecycle projects, new schools, fire and safety upgrades, a districtwide fiber network, completion of the girls’ locker room at Permian High School, refurbishing the weight room at Odessa High School and renovation of the bathrooms at Ratliff Stadium.

Ector County ISD Superintendent Tom Crowe said the defeat showed that the bond proposal was not put together correctly.

Near Houston, voters in the Victoria ISD defeated a $141 million bond proposal that would have upgraded aging facilities and improved technology and communications systems.

Victoria ISD Superintendent Robert Jaklich said the district would need to revisit the bond proposals.

"The biggest takeaway is our message was not communicated articulately,” Jaklich told the Victoria Advocate. “We need to do a better job of informing the community."

School officials also factored in the destruction brought to the region by hurricane Harvey. However, most school bonds, many among the largest on the ballots, won approval in the Houston area.

Voters approved nearly $900 million for the Spring Branch Independent School District, $609 million for Katy ISD, and $445 million for Lamar Consolidated ISD, all west of Houston. Voters in the Tomball ISD north of Houston approved $275 million of bonds.

In Webb County on the Texas-Mexico border, almost 75% of voters rejected $125 million to build a jail. The proposal would have allowed Webb County, whose seat is Laredo, to build a 738-bed jail and related facilities.

Working against the proposal was the fact that property taxes would be raised to pay off the bond. The owner of a $100,000 home, for example, would see their county tax bill increase by about $44 a year, according to city officials.

No other proposals of $100 million or more were defeated in last week’s vote.

About $104 million of school district bond proposals for athletic fields were defeated across the state.

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Bond elections School bonds Pension obligation bond City of Houston, TX City of Dallas, TX Austin Independent School District, TX Texas