Two Harris County cities have published notices that their councils will authorize millions of dollars in Certificates of Obligation without approval from their respective taxpayers, and it’s all legal according to the Texas Local Government Code.

The first to make public their intention to approve the certificates is the city of Nassau Bay which sits on the southeast border of Houston. After considering the agenda item, the council decided they will meet on March 9th, 2015 to vote on the issuance of $1.6 million in Certificates of Obligation payable by ad valorem tax. What the city doesn’t tell, is that $3.5 million of their long-term debt is due to previous Certificates of Obligation that they have yet to pay.

Jersey Village was next to publish a legal notice about their intent of authorization. The notice stated city council will meet on March 16 to authorize $8 million in Certificates of Obligation. The state comptroller has reported that the 3.5 square mile city of 7,600 residents already has $18 million in outstanding debt. 

The Texas Local Government Code gives certain cities, counties, and districts the authority to issue debt in the form of Certificates of Obligation without voter approval. While the governing bodies are acting lawfully by making the information regarding their intentions available, they do so in a manner that most citizens won’t find out in due time to organize and present a valid petition.

City councils have a tendency of using these alternate means of revenue to fund government instead of reducing spending in other areas and finding the funds in their budget. These two small cities may not be so profligate compared to major cities in the area such as Houston, but regardless of the level, uncontrolled municipal spending is a problem that needs to be reined in.

The code gives the city council the authority to make these decisions, but more importantly it gives informed taxpayers the ability to fight back.

It only takes five percent of each of these city’s electorate to stop, or at least delay, the issuance of millions of dollars in debt.

Section 271.049 – C of the code states that if before the date set for the authorization of the certificates the municipal clerk receives a petition signed by at least five percent of qualified voters in the municipality, the authorization of the certificates cannot be done unless approved in a public bond election.

The size of these two cities make them the perfect battleground for taxpayers to reject city council’s attempts to burden them with more debt.  It takes a small percentage of the residents to stand up and petition against the certificates. Will city officials again be given free reign, or will taxpayers let their voices be heard?

Charles Blain

Charles Blain is the president of Urban Reform and Urban Reform Institute. A native of New Jersey, he is based in Houston and writes on municipal finance and other urban issues.