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Local governments seek upping existing $322 billion debt tab

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With the May 10 election, voters in 65 jurisdictions across Texas are being asked to approve $6.5 billion ($9 billion with interest) of new debt to an already existing $322 billion local debt tab.

Never mind rankings that list Texas as second only to California in total debt and second only to New York in per capita debt. Disregard the Economic Outlook Ranking of the recently-released Rich States, Poor States report that cites Texas as #48 for its debt service as a share of tax revenue. And pay no attention that local debt is growing faster than the increase in population and inflation.

Local government proponents say new debt is for the children, it’s making our communities stronger. Opponents counter it’s living beyond our means, it’s jeopardizing the financial well-being of future generations.

Funny that schools love to talk about bullying and peer pressure when in reality, school districts and other local governments are often some of the biggest bullies in our communities and routinely invoke such tactics when seeking new taxpayer funds.

This election cycle, however, seems different. Public opinion increasingly supports the federal government tightening its belt by reducing spending, working down debt levels and better prioritizing its use of public dollars continue.

Similar accountability has less often been demanded of the local governments routinely seeking new debt. That is, school districts, cities and counties along with community colleges, health/hospital districts, water districts and other special purpose districts. With people less willing to openly oppose prominent community members, friends, neighbors or co-workers, these entities have previously faced less accountability and policy challenges, but that seems to be changing.

A few key races help demonstrate the new exposure and opposition local school district elections are receiving.

Cy-Fair ISD

Cy-Fair Independent School District is proposing it’s largest bond in the school district’s history – $1.2 billion – nearly $1.7 billion when the interest (generally about 40 percent) is added. This debt would be on top of, per the Texas Bond Review Board, $2.77 billion existing debt ($1.74 billion principal/$1.03 billion interest). That this election would leave Cy-Fair taxpayers nearly $4.5 billion is likely not a talking point promoted by ISD bond proponents.

In a Houston Chronicle guest post, Kelly Horsley says this of the bond proposal:

What some of us who are not in favor of this bond are asking is that the district reevaluate some of the things that are being requested. Like $20 million for a new and upgraded phone system for the teachers and staff? We would like to see it broken up into smaller pieces so that the voters are not being asked to pass such a large debt package in one up or down vote.

Horsley goes on to question the election’s timing and the rotation of early voting locations at various schools, tactics similarly discussed in Understanding the mechanics of Texas school district elections.

Frisco ISD

Per a recent Dallas Morning News article, the Frisco Independent School District is often considered the nation’s fastest-growing district with 3,000 new students per year. While 20 years ago the district’s enrollment was less than 2,000, it has reportedly grown today to 46,500 and includes six high schools with two more currently under construction.

The Frisco ISD is now seeking $775 million (slightly more than $1 billion with interest) for a bond package that would include 14 new schools. The Texas Public Policy Foundation offers an interesting analysis entitled A Profile in Runaway Debt: Frisco ISD’s $775 Million Bond Proposal which reminds how this amount will be on top of an existing $2.6 billion debt load ($1.4 billion principal/$1.2 billion interest) leaving taxpayers total debt approaching $4 billion.

The report also notes that the current debt represents nearly $56,000 per enrolled student, an amount higher than all adjacent large school districts. If passed, the new bond’s spending on short-term non-facility projects will cost more than $67,000 for every student the new facilities are intended to accommodate through the 2020-2021 school year.

Responsible Spending Coalition of Texas, an organization opposing the bond, says it’s for building more schools, but calls itself “equally emphatic” over not giving the Frisco ISD “open-ended authority” for the proposed spending.

The group has identified seven critical gaps and their risks to taxpayers and future generations.

  • Risks from inflated construction cost projections and excess funding
  • Risks from accumulating approximately $4.4 Billion in debt service costs
  • Risks to FISD’s ability to pay the annual debt service
  • Risks from 20% Property Tax Rate increases
  • Risks from balloon payments
  • Risks of excess capacity from over-building
  • Risks to taxpayers from lack of transparency

Arlington ISD

The Arlington Independent School District is seeking to pass a $663.1 million package. Again rarely mentioned is how the $663.1 million principal combined with about $265 million in interest makes the package on which votes are being cast more accurately valued at $928 million.

On top of that, with current debt at $567.4 million ($445.1 million principal/$122.3 million interest), passage of this package will leave district residents with a debt burden of nearly $1.5 billion – nearly triple their current amount. Note in reporting on the current debt, this Star-Telegram article lists only the $445 million principal.

In Debt-laden Arlington ISD Set to Ask Voters to Approve Even More Debt, TPPF notes:

Some of the contents of AISD’s debt proposal are suspect; but even more, the district’s timing is also curious as its 10-year student enrollment growth does not support an ask of this nature.

According to the Texas Comptroller’s Debt-at-a-Glance, AISD’s enrollment growth from 2003-04 to 2012-13 was just 4.1 percent compared to a statewide average of 14.9 percent.

Given the district’s already large debt-load and it’s relatively slow enrollment growth, the district would be wise to reconsider asking voters to add more new debt. But given the way that local governments have behaved in the past on local debt, it won’t be a surprise if they don’t.

Lockhart ISD

The Lockhart Independent School District, a district with slightly more than 5,000 students, is seeking $63.9 million, $89.5 million when factoring interest.

With current debt of $28.4 million ($22.1 principal/$6.3 interest), the district is seeking new additions and renovations to the high school, a new elementary school and district-wide capital improvements.

Believing “it’s a blessing to leave children an inheritance, not debt,” opponents at the It’s OK to vote NO Lockhart FB page say they are unconvinced “that nicer facilities will make our kids smarter, or help them in any way to excel in life.” With having seen “more and more money go into government run schools, and we have not seen progress,” they say maybe it’s time for a strategy change. They also contend “the increase in taxes to pay for this debt will put heavy burden on many families in our area.”

White Oak ISD

The White Oak ISD again offers a troubling look at proportionality when it comes to bond elections. This district of 1,446 students is asking voters to approve a $25.2 million bond package, $35.3 million with interest. With current debt of $3.6 million ($2.9 million principal/$690,700 interest), this constitutes a 10-fold increase.

With the bond, a new high school and fieldhouse would be built. The middle school would be updated and cafeteria space at the elementary school increased.

As with larger districts, though school districts and many community leaders rally around the new spending, opposition has emerged.

“There are a lot of questions out there,” local business owner Lewis Orms told the Longview News-Journal. “There’s more and more people, I’m finding, that are really looking.”

The paper further reported:

Orms said the latest estimate of the tax increase he’d heard was 30 cents, an amount that would challenge business owners who are wading into requirements of national health care reform, or Obamacare.

“It’s going to affect all of us,” said Orms, whose employees own 49 percent of his O&D Manufacturing.

Buildings wear out, need upgrading and sometimes new facilities are required. Expenditures for technological and other infrastructure improvements indeed must be addressed.

Each election cycle, however, now seems to bring out a new roster of government entities seeking more taxpayer dollars to fund what appear as never-ending spending sprees. With an “everyone’s doing it” attitude, demands for new schools, infrastructure upgrades including buses, a tablet for every student and opulent athletic facilities are receiving pushback from a financially tapped-out public whose goodwill is increasingly being replaced with skepticism.

School districts account for the largest growth sector of outstanding local government debt. Spending from 1999 through 2009 saw Texas public education funding rise five times faster than student enrollment growth. That money was asked for, received and what have we to show for it? Are students results five times better? Hardly. And these financial outlays must have done nothing to improve education infrastructures. If they had, would today’s frequency and desired level of new spending truly be needed?

Interestingly, many bond opponents aren’t saying don’t do it, they’re saying not so much, not so fast. Most people genuinely want a better future for their own children and other generations to come. The real question becomes if that better future flows from saddling taxpayers both today and for years to come with unsustainable debt or might the lessons of fiscal responsibility and restraint – though not as fun and today’s learning is supposed to be fun – be the real ticket to future prosperity.

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