Texas has the second highest per capita local debt in the nation and four West Texas cities – El Paso, Lubbock, Abilene, and San Angelo – are partially to blame. A recent article published by the State Comptroller’s office stated that between 2006 and 2015, the amount of debt issued without voter approval in Texas cities, counties and hospital districts has increased by an unprecedented 85 percent.
This is done through certificates of obligation (COs), a method in which local taxing entities can issue debt relatively quickly and without voter approval – making them a spending tool typically reserved for emergency projects. They aren’t necessarily restricted to emergencies, however, and certainly aren’t always used for such.
For example, in 2016 Midland City Council placed over $22 million in CO proposals on the council agenda. Among the projects were upgrades to city parks and pools as well as renovation plans for the municipal golf course; items that stray far from the definition of “emergency.” More recently, the city council issued $31 million in CO bond debt to help fund a complete renovation of Midland’s convention center.
Although Midland serves as an example of how local governments are bypassing voter approval to fund non-emergency projects, it seems that the problem is far worse elsewhere. The graphic below, featured on the comptroller’s website, lists the twenty jurisdictions in Texas with the largest outstanding CO debt – showing Bexar County as having over $1.1 billion in non-voter approved debt.
Also, as seen in the graphic with the City of San Antonio, Bexar County, and Bexar County Hospital District, it’s not uncommon for government entities that issue COs to overlap with each other, multiplying the debt burden for certain taxpayers.
The abuse of COs has been cause for controversy among local residents and policymakers alike. During the 84th legislative session, State Rep. Dan Flynn (R-Canton) filed HB 1378 that prohibits taxing entities from issuing COs for any projects voters rejected in the preceding three years. However, as described in the comptroller’s report, local officials seem to be finding ways around the restrictions. So far, there have been no other successful attempts to curtail CO use at the legislative level.
Exhibit 3: Twenty Texas Jurisdictions with the Largest Outstanding CO Debt, 2015 (In Millions)