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Monday, February 21, 2011

Major shift in County borrowing policy contributed to jump in County debt


The year 2010 marked a major turning point for Hays County, however. Our elected officials made a conscious decision to use two new ways of borrowing money, both of which bypass the traditional voter approval process


Update, Thursday, Feb. 24 – For clarification: Judge Liz Sumter was the only member of the 2010 Commissioners' Court that voted against borrowing $850,000 for the land purchase near Jacob's Well. Also, on March 23, 2010 when the court authorized their financial advisor to move forward on a bond issuance for the Government Center, Judge Sumter was the only member of the court that voted "NO".

However, when the court voted a week later to authorize issuance of the bonds and levy an Ad Valorem tax to pay for them, Judge Sumter joined the rest of the Commissioner Court and voted "AYE". (Reference court minutes 3-23-2010 item #26948, and 3-30-2010 item #26965)

I asked Judge Sumter to clarify why she voted NO on March 23rd and YES a week later. Her answer was that there are always two votes when a bond is issued. The first vote is a decision to use bonds to borrow money. The second is to formally approve the contracts used to issue the bonds. It is her philosophy that once the court had voted and approved the decision to borrow money, it was her role as judge to work with the court to make sure they received the best deal possible.

Note: The RoundUp spoke with County Auditor Bill Herzog last week. As of Octboer 2010, Herzog said, the county's debt stood at $215,649,998.00 and is projected to rise to around $400 million once all the road bonds are sold. The $400 million probably is a little high due to road projects coming in below their projected costs. Over time – a long, long time – the county expects to recoup an estimated $133 million from TxDOT as reimbursements on the qualifying "pass through" road projects. Thus far, the county has received pass through payments from TxDOT totaling $1.9 million for the Hwy 290 reconstruction. Meanwhile, the county is paying a pretty penny on principal and interest on its whopping debt – expected to reach $17 million in 2011, up from $7.5 million in 2009.

We'll add another avenue to Ms. Lovejoy's list the county can use to go around a vote of the citizens: A revenue bond. It is one method being bounced around to finance the purchase of LCRA's 290 water line and operation in Hays County – so says County Commissioner Will Conley. A due diligence review on the water line operation is currently being led by Pct. 4 Commissioner Ray Whisenant, Dripping Springs. LCRA is carrying a $140 million debt on the line, which probably would be assumed by the county if a deal is ever reached. This water will certainly come at a high price to consumers and the taxpayers.

Send your comments and news tips to roundup.editor@gmail.com, to Ms. Lovejoy at leneel@centurytel.net or click on the "comments" button at the bottom of the story. Look for more reports from Lovejoy at her new watchongov.com website.

By Lenee Lovejoy
Special to the RoundUp

In 2010 the Hays County government quietly began borrowing money in new ways that bypass the need for a voter proposition election. This contributed to the record increase in county debt that has occurred over the last several years.

This change in how the county borrows money is significant because most of the money spent by county government is raised from taxes and fees paid by those who live in the county.

Just how much money has our county government borrowed? According to county auditor, Bill Herzog, county debt is expected to reach $400 million by the end of fiscal year 2011. The county government only takes in about $81 million dollars in revenue each year.

The amount of debt held by our county government affects the pocket books and quality of life of all Hays County residents. This is because county debt works somewhat like our personal credit cards: the more we charge, the higher our monthly payments become. This leaves less money for other household expenses.

The same thing happens with our county government: As the debt level goes up, the payments on the debt go up, leaving less money available to provide county services. As a result, the county government must eventually choose to either cut services or take more money from the pockets of the citizens of the county.

Prior to 2010 the county government borrowed money mainly by using something called General Obligation Bonds (GO). These are sometimes called voter bonds because voters must pass a proposition before elected officials can borrow the money. These were used in May of 2007, when citizens agreed to take on debt and approved a $30 million bond proposition to purchase parks and open space. Again, in November, 2008, citizens agreed to borrow and passed a $207 million road bond proposition for the county.

The year 2010 marked a major turning point for Hays County, however. Our elected officials made a conscious decision to use two new ways of borrowing money, both of which bypass the traditional voter approval process. In March, 2010, county officials borrowed $84 million dollars by using something called Certificate of Obligation Bonds (CO); they then issued an additional Ad Valorem tax against all taxable property in the county to pay for these bonds.

The Certificates of Obligation (CO) are different because they allow the Commissioners Court to borrow money without permitting the citizens to vote on a proposition. This method of borrowing had previously been reserved for use in emergencies, that is, special situations where there is no time to hold a voter proposition.

In 2010, however, our elected officials used the Certificate of Obligation for a non-emergency: the construction of the new Hays Government Center. In November of 2010, Commissioners introduced another method of borrowing large sums without voter approval: they borrowed $850,000 from a national nonprofit organization, at above market interest rates – 6%, to purchase land for conservation.

Money was still available from the county’s 2007 Parks Bonds, at 4% interest, when the decision to borrow additional money was made. The elected officials who decided to borrow without voter approval were County Commissioners Debbie Ingalsbe, Will Conley, Jeff Barton, and Karen Ford, and County Judge Liz Sumter.

Commissioners Barton and Ford, and Judge Sumter lost their bids for re-election last year; Conley and Ingalsbe do not come up for reelection until 2012.

Will the newly elected members of our County Commissioner Court continue this dangerous borrowing trend? County Judge Bert Cobb and Commissioner Ray Whisenant have both gone on record to say that they will not use borrowing methods that bypass voter approval. I have not yet had a chance to talk with Commissioner Mark Jones regarding his position on this.

4 comments:

Anonymous said...

Thanks so much for your research
and your clear writing, Lenee!

Anonymous said...

Very informative. Thank you.

Barbara Hopson said...

Why would Commissioner Will
Conley be pushing for Hays County
to buy LCRA's Highway 290 water
pipeline (which LCRA is selling
because the venture is unprofitable)? That proposal is not
even mentioned in the Hays County
Water and Wastewater Facilities
Plan for which over $200,000 was
paid to HDR Engineering and which
commissioners adopted earlier this
month.

The LCRA line would come at a cost
of over $140 million in assumed
debt. The plans suggested by HDR, on the other hand cost "only"
$35.1 million (pipeline from Kyle
to Wimberley), $35.0 million
(pipeline from San Marcos to Wimberley), or $20.7 million
(combination truck hauling and
pipeline San Marcos to Wimberley).

Anonymous said...

What Ms. Love-Joy fails to address - probably because she is not capable of making the connection - is the reason for our budget shortfall. Does that not matter anymore?

Are we only capable of expressing insipid antipathy toward our special-interest controlled governments - that rubber stamp unbridled development and irresponsible growth, then creating recessions, and then watch our infrastructure and human services get thrashed by sometimes well-meaning, often deceptive, but ultimately ignorant "budgeting experts."

The solution is simple: Tax the elite oligarchs at a higher rate for all the corporate write-offs and favorable tax write-offs they get from their puppet politicians. But tax them before their tax-funded excesses create mass hysteria in the form of recessions, and before our corporate-owned governments bail them out with our income, property, and sales tax dollars - and your wages, benefits, and old age pensions.

If we implemented and retained those simple and practical policies, we wouldn't need Ms. Love-Joy's articles (or her future schemes, whatever they may be).