It’s much “sexier” for bloggers and the MSM to talk about the trillion-dollar national deficit and even Texas’ projected budget shortfall than about local government debt. But I like talking about pesky local government, mostly because I believe that the government closest to us also does the most damage. When you consider than in just the last decade, local government bonded debt has gone from $1.5 trillion to $2.4 trillion, I think my point is proven.
Steven Malanga of City Journal has written a fantastic story about this problem, in which he points out that it isn’t just the figure that’s so shocking, but what is being purchased with it: “…giant development projects, for starters, including many in which the private sector has wisely shown little interest, except when government subsidizes them.” Malanga goes on to explain how this problem originated:
These projects trace their origin to the urban-renewal movement of the 1950s, when states and the federal government cleared tracts of supposedly blighted urban slums and replaced them with large, centrally planned housing projects. Over time, such efforts became so widespread that even thriving communities were declaring themselves blighted to justify construction. The nature of the projects changed, too, as politicians increasingly issued bonds to make bets on private ventures whose economic benefits were uncertain, at best.
I think we’re all too familiar with what kind of structures are deemed so essential that local governments throw bonds on the ballot when they think we aren’t looking, and pass them at astounding rates. We get Taj Mahal high schools, Coliseum-esque football stadiums, cathedrals for administration buildings. And that’s just for starters, of course. Bicycle “boulevard” projects, park improvement plans…the debt to which your local government is willing to obligate you, your children, and your grandchildren’s children goes to pay for every boondoggle under the sun, and almost always without your complete prior knowledge and informed consent.
And of course, it’s worse than that, if you can believe it. Malanga points out that local governments “increasingly use the municipal debt to create the false appearance that they are balancing the budget.”
Bond debt is not a new thing in American history; Malanga tells us that the first municipal bond debt on record in the United States was in 1812, to pay for a canal. But just because something has been done repeatedly, and sometimes successfully, in the past does not justify the continued use (and some would say abuse) of the practice today.
For the most part, Malanga’s story focuses on those states and municipalities who have reaped a bitter harvest from being unable to meet bonded debt obligations, and what he has written here ought to serve as a stern warning. Texas is not immune to the problems California and New Jersey, and neither are Austin, Houston, and Dallas immune to the problems of Charlotte, North Carolina. In fact, Texas is served best by the strong state economy that leaves the local government debt problem in the quiet shadows – when your state has one of the lowest unemployment rates and is still the number one state for Fortune 500 companies, it’s hard for voters to get agitated about ISD debt to the tune of $250 million and more. But that’s exactly the problem, isn’t it? We appear to have it so good here that we’re missing the problems that are a real drain on our resources, and which will haunt us during the state’s tough budget cycle ahead. Texas is among the worst in the nation for local government debt per capita (to get an idea of what that means, see this 2009 Denton Record Chronicle article)
I love what Veronique de Rugy had to say about this: “The bottom line: If this debt in the states should be added to the federal debt — and especially if this debt has to be repaid back with higher taxes — there is one very large bill coming our way. Remember, there is only one taxpayer, not a state taxpayer and a federal one.”
Too true. As such, there can be only one solution, and you can bet I don’t mean electing tax-and-spenders at the bottom of the ballot. This is why we need partisan elections, on uniform election days, to uncover the worst of the seemingly innocuous, hide-behind-the-rhetoric, tax-and-spend bureaucrats who lurk in county commisioners’ courts, city councils, school boards, MUD boards, and so on.
And just to drive my point home: the city of Austin, as of August 2009, has $4,653,793,433, or over $4.6 billion, in outstanding bonded debt. That’s just the principal amount, and is just city debt, not what taxpayers owe to the local ISDs or to Travis County. (Thanks to the Bond Review Board for the information). It also obviously does not include the $90 million in brand new bond debt that the city plans to ask taxpayers for this November.
