Texas voters will add up to $8.7 billion to the local bond pipeline
DALLAS – Voters across Texas will consider about $8.7 billion of local bond proposals on Nov. 6, with the Houston area’s Fort Bend Independent School District topping the list at $992.6 million.
The 51 proposals on next week’s local ballots are about $1.1 billion more than the $6.6 billion requested in Texas’s May 5 election and about $2.3 billion less than the record $11 billion on the November 2017 ballot.
School bond proposals again dominate the ballots, with 35 districts seeking $4.94 billion. Of the 10 largest bond proposals in the state, eight are from school districts, including the chart-topper from Fort Bend ISD, a $695 million proposal in suburban Dallas’ Frisco ISD, $508.4 million from Round Rock ISD in suburban Austin and $480.5 million from Alvin ISD outside Houston.
The city of Austin is asking voters for $925 million of bonds, including $250 million for affordable housing.
“This is a historic level of funding for housing, and it is time to have that conversation with the community,” city council member Ann Kitchen said when she voted to place the issue on the ballot in August. “This is such a critical need.”
Austin and 10 other cities are asking voters for $1.53 billion. The city of Arlington between Dallas and Fort Worth is asking voters for $189.5 million for traditional city projects.
Four counties have proposals worth $1.6 billion, led by Tarrant County’s $800 million proposal for improvements to John Peter Smith Hospital. The bond request for the county’s hospital is the first since 1985 and would go toward $1.2 billion in upgrades, including a new behavioral and mental health hospital, four regional medical centers, an outpatient surgery center, increased bed space and expanded cancer treatment.
Collin County north of Dallas is seeking a record $750 million road bond issue to cope with traffic in one the nation’s fastest growing counties. The county is proposing to convert existing roadways into a high-speed, limited access corridor that would eventually connect with a 250-mile outer loop around the entire Dallas-Fort Worth Metroplex.
One community college district, the College of the Mainland in Galveston County is seeking $162.5 million.
Most of the volume comes from three metro areas. The Dallas-Fort Worth Metroplex accounts for $3.1 billion, followed by metro Austin at $2.1 billion and the Houston area at $1.7 billion.
Fort Bend ISD in the affluent western suburbs of Houston had considered asking voters for $1.5 billion in one ballot but decided chances of passage would be improved if the proposal were broken into two. The school board expects to ask voters for another large authorization in three years.
With underlying ratings of AA-plus from S&P Global Ratings and Fitch Ratings, Fort Bend ISD serves an estimated population of 426,939, with median household effective buying income rated “very strong” by S&P at 154% of the national level.
The district has faced challenges with state funding cuts while its enrollment and economically disadvantaged population continues to grow, officials said.
“Our average age of facilities is 25 years,” Superintendent Charles Dupre told the school board in August. “Based on what I’ve seen, we have under-invested in our facilities.”
In Corpus Christi on the Coastal Bend of Texas, both the city and the school district are asking voters to approve bonds. The Corpus Christi ISD is seeking $210.8 million, while the city proposes $96 million. This is the school district’s fifth bond proposal in the last 10 years.
As school districts seek bond money, many are also asking voters to increase tax rates to pay for operations.
Texas school districts have two tax rates, one for maintenance and operations and a second for debt service. State law requires that any school district needing to raise the maintenance and operations portion of its tax rate above $1.04 per $100 of assessed value seek voter approval.
In the face of declining state support, school districts are facing deficits unless they increase the maintenance and operations tax rate. Some districts are asking voters for so-called “swap-and-drop” tax rate changes. Under “swap and drop,” the tax rate for debt service is lowered while the rate for maintenance and operations is increased, effectively keeping overall taxes level.
Over the five-year reporting period, 44% of Texas’ new-money local debt issuance was used to finance educational facilities and equipment including school buses, according to the Texas Bond Review Board. General-purpose debt, which includes public improvements, ranked second at 22%.
School districts, cities and water districts account for more than 86% of new-money and refunding transactions. Over the past five fiscal years, new-money debt issuance totaled $75.19 billion and refunding debt totaled $83.71 billion.
During that time the top three issuers of new-money volume were school districts, cities and water districts that together comprised 87% of the new-money volume and 82% of the refunding transaction volume.
Texas, which holds local elections in May and November, is reporting unusually high turnout in early voting for a mid-term Congressional election. The state's five largest counties are seeing nearly twice the numbers of early voters the November 2014 election produced, according to the Texas Tribune.
In Harris County, the state’s most populous, 13.2% of registered voters had voted by Thursday, compared to 6.4% over the same time period in 2014. In Dallas County, the totals were 16.9% of registered voters, compared to 5.9% four years ago.
Fearing that voters in a high-turnout election would not give their record $2.5 billion flood bond proposal sufficient attention, Harris County Commissioners decided to call a special election last August on the anniversary of Hurricane Harvey’s landfall. In a light turnout, the bonds passed.
Aside from the Harris County special election, Fort Bend ISD’s proposal is the largest since last November when Austin ISD won passage of more than $1 billion to build and upgrade schools.