DALLAS – Two of Texas' largest cities are sizing up $2.5 billion of bond proposals for the November ballot.
In Dallas, the City Council on Wednesday increased the size of a bond proposal to $1.05 billion. Last spring, the council was deliberating an $800 million bond proposal but decided to delay the vote until the Texas Legislature could pass a bill to help relieve a worsening public safety pension crisis.
To restore confidence in the fund’s governance, the Texas Legislature passed a bill that gave the city more control and lessened the influence of beneficiaries.
In Houston, the council on Wednesday approved placing a $1 billion pension obligation bond proposal on the ballot but delayed a decision to add $495 million of general obligation bonds until next week.
Under Texas law, bond elections must be called by the governing body at least 78 days before the Nov. 7 election day. Cities and counties may not call elections ahead of the 90th day before election day. Bonds may be sold 30 days after the votes are canvassed.
Last May, San Antonio voters approved a record $850 million of bonds as voters across the state considered about $8.2 billion of proposals.
The Dallas council voted 11-4 to increase the size of the bond proposal, despite resistance from city manager T.C. Broadnax. The postponed May bond proposal would have primarily fixed Dallas streets, many of which are in bad shape. Like other cities, Dallas limited spending on capital projects after the 2008 financial crisis, which deferred work on city streets.
The November proposal is the largest since 2006 when voters approved $1.35 billion. After the recession, the city slimmed a 2012 proposal to $600 million, calling it a “no frills” package.
The upcoming proposal includes parks for downtown Dallas and the Pleasant Grove neighborhood, a skate park at Bachmann Lake, repairs for Fair Park and other cultural facilities, along with new libraries and fire stations.
At the urging of Dallas Mayor Mike Rawlings, the city halted plans for an $800 million bond election because of a worsening Dallas Police and Fire Pension Fund that was experiencing a bank run from retiring employees worried about potential lost benefits.
Lawmakers this year also approved legislation restructuring Houston’s pension funds, though that city’s problems were not as severe as Dallas’s.
The $1 billion of pension obligation bond proposal was part of the city’s deal with city employees in exchange for reduced benefits. Mayor Sylvester Turner urged Texas lawmakers not to require a public vote to issue the POBs but lost that battle. Turner feared that voters would not understand how critical the bonds were to settlement of the dispute with city employees.
Both cities suffered downgrades to their general obligation ratings due to the pension problems.
In December 2016 Dallas received its third downgrade in two months when Moody's Investors Service lowered the city's general obligation rating to A1 from Aa3, maintaining a negative outlook. The Moody's action came the same day S&P Global Ratings placed Dallas' AA rating on watch for possible downgrade.
Houston carries negative outlooks on its ratings of Aa3 from Moody’s and AA by S&P.