By Karla Y. Sierra

The state of Texas requires that new issuances of public debt that will be paid by tax revenue be approved by voters at the ballot box before bonds can be issued. However, since 1971, certain county and local levels of government have been able to circumvent this requirement by utilizing an exception: Certificates of Obligation, which generally do not provide voter approval before being issued.

Originally, COs were meant to be used to quickly provide funding in the aftermath of some disaster where rebuilding couldn’t wait for voting day to get approval, but much like the proverbial mouse and the cookie, local governments have come to abuse COs as a means of funding non-emergency projects without voter approval.

LIBRE is fighting against this abuse of COs by the city, county and UMC and recently scored a victory against abusive funding, but we aren’t stopping there. Ultimately, lawmakers in Austin need to change the law to remove the temptation for easy funding in the first place.

There is no doubt that municipalities have been abusing the CO law. The Texas Bond Review Board reports that between 2013 and 2022 there has been over a 48% increase in outstanding debt that has been issued as COs. This means that Texan taxpayers have been put on the hook for over $6 billion in debt that they have not approved via voting.

This increase in debt is not surprising, with the Texas Public Policy Foundation reporting in 2017 that COs are “being issued for capital improvement projects that are either controversial or discretionary, such as public art projects, swimming pools, and parks.”

Even when COs are being used for essential projects, the fact of the matter is that they are being abused if used for anything other than an emergency.

El Paso is one of the worst offenders, having racked up over $851,565,991 in COs. Nearly a full quarter of El Paso’s debt has been accrued through COs with no voter approval. In fact, El Paso has the second highest outstanding CO debt of any city in the entire state!

As if this ignominious distinction was not bad enough, the El Paso county hospital, UMC, recently tried to add an additional $346 million in COs without voter approval to fund improvements to the El Paso health care system. Not only is this a stunningly large amount of debt to unilaterally issue, but it also would have entailed a property tax increase with no input from voters.

Fortunately, LIBRE was able to mobilize voters across El Paso and take advantage of an existing law allowing 5% of the city’s residents to stop the issuance of COs via petition. As a result, El Paso has been forced to halt this debt funding project and will be forced to appeal directly to voters via a public bond election if they want to continue.

However, LIBRE is not going to stop there. This is just one victory in the battle for accountable public finances. Local debt has been increasing in recent years, and now Texas ranks second among the 10 most populous states when it comes to per capita local debt and it is time to clamp down and ensure voter accountability.

With your help, LIBRE will take the fight to Austin to ensure that the CO law is reformed to guarantee that it can only be used for true emergencies and not as a way for officials to fund pet projects or avoid voter approval and accountability.

About the Author:

Karla Y. Sierra is Grassroots Engagement Director for The LIBRE Initiative -Texas.

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