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.