May 4 will be a red-letter day in League City. That first Saturday in May will be the first time in almost 30 years that voters have been asked, or allowed, if you prefer, to decide whether their city should take on a considerable amount of debt to pay for projects deemed to be in the public interest.
The last time the city held a bond referendum was 1992, which was 27 years ago. That’s remarkable when you consider League City is among the fastest growing cities in Texas.
And that has been an odd state of affairs because population growth is among the main things that drives the need for capital improvements to roads, public facilities and all the other things that make a city.
As we’ve noted before, League City didn’t grow to a population of more than 100,000 without taking on debt. It got in the habit of taking on debt without going to the voters for permission to do so.
The city had been a model of innovation, of sorts, in funding projects through certificates of obligation, rather than general obligation bonds. Government officials have come up with all kinds of rationalizations about why certificates of obligation are better than traditional bonds.
A common one is that they are “more cost-effective.” The real reason officials prefer certificates, and have over the past 20 or so years expanded the list of their acceptable uses to include pretty much anything and everything, is that they don’t require a vote of the people.
Through the certificates, governments can put taxpayers on the hook for substantial amounts of debt with a simple majority vote by the council.
Since 2004, for example, League City has assumed about $200 million in debt through certificates of obligation without a single vote of the residents.
Rationalizations aside, the reason cities issue certificates of obligation rather than taking general obligation bond propositions to the voters is fear of having the propositions rejected. That happened to League City in 1992 and it’s no coincidence that the city amassed debt through certificates of obligation for the next 26 years.
It took some courage and some faith in the civic instincts of League City residents for the current city council to step up and attempt to break that undemocratic habit by calling a May bond referendum during which voters will decide whether the city can take on $145 million in general obligation debt.
Voters will be asked to consider three propositions:
• Proposition A: $73 Million General Obligation Bond for Flood Protection and Drainage Improvements
• Proposition B: $72 Million General Obligation Bond for Streets, Roadways, and Mobility Improvements
• Proposition C: ¼ Cent Sales Tax Referendum
Revenue from Proposition C would be used to pay the debt the city would take on through propositions A and B, officials have said.
So, if voters approved all three, the city wouldn’t have to raise the property tax rate to service the debt, officials have said.
If voters approved Props A and B, but not C, the tax rate would have to go up about 1.4 cents on $100 of taxable value, which would cost a homeowner with an assessed home value of $250,000 with a homestead exemption about $28 more each year in property taxes, according to the city’s own calculations.
The real question for voters is not whether their city should take on debt to pay for road and drainage projects. That’s inevitable for a city growing as fast as League City.
The question is whether to reward the city’s efforts to end its long reliance on vote-less debt by supporting a reasonable and necessary general-obligation bond package.
• Michael A. Smith