State comptroller raises the red flag on debt

By Joe Holley | Wednesday, September 26, 2012 | Updated: Thursday, September 27, 2012 10:28am
Houston Chronicle

AUSTIN — Local governments are loading down Texas taxpayers with debt without providing them enough information about the amount already owed for roads, schools and other public projects, State Comptroller Susan Combs contends in a report released Wednesday.

Titled "Your Money and Your Debt," the report notes that the current level of government debt approved by Texas cities and counties soared from 2001 through 2011, with tax-supported debt of cities increasing 126 percent to $27 billion. Tax-supported county debt, the report said, grew by 131 percent to $10.3 billion.

"As taxpayers step into a voting booth to approve new debt, government should tell them how much debt they are already responsible for repaying and how much debt service is included," Combs said in a statement. "Elected officials are responsible for telling the taxpayers they serve about the price tag associated with new and existing debt."

Critics of Combs' report were quick to assert that local governments have been forced to take on essential projects the state has refused to fund.

The tab in Texas includes $40.5 billion of outstanding state debt and $192.7 billion of outstanding local debt, including $63.6 billion held by the state's 1,024 school districts. Sixty-one percent of local debt is tax-supported, while 39 percent - about $75.8 billion - is backed by revenues generated by fees, tolls and other sources. According to the report, Texas has the least state debt among the 10 most populous states, but the second-highest local debt burden.

'There must be balance'

Houston, for example, has total outstanding debt of $13.1 billion. With a population of nearly 2.1 million, debt per capita is $6,264. Most city debt, the comptroller's report points out, is backed by fees and other revenue sources.

"We could do a better job on being smarter about borrowing," Combs said. "Are we really being careful before we build another building?"

Voters will be considering $2.7 billion in bond issues on the ballot this November from the city, Houston Community College and Houston Independent School District.

Janice Evans, speaking for Mayor Annise Parker, said the mayor has a record of limiting debt, from ending the practice of issuing bonds to pay pensions to supporting the pay-as-you-go drainage fee dubbed Rebuild Houston. The latter, Evans said, allows the city's bond proposals this fall to be the smallest in 30 years and to require no tax increase.

"Much like the purchase of a car or a home, long-term debt allows the city to finance very expensive and necessary public improvements. However, there must be balance," Evans said. "The numbers in the state comptroller's report clearly show that Houston is maintaining that balance with a per capita debt that is in line with that of other major Texas cities."

Combs' report puts Houston third in per-capita debt, behind San Antonio and Austin. Debt service makes up 18 percent, or $804 million, of the city's $4.2 billion budget this fiscal year, Evans said.

Although Harris County has no bond proposals on the ballot this fall, County Judge Ed Emmett criticized the report's use of population growth and inflation as a benchmark to compare spending and debt. The state built the University of Texas and Texas A&M University with proceeds from oil discoveries, Emmett said, and could not have done so if it had been constrained by that alone. "The Ship Channel, the highway system, all those things were built in anticipation of future growth, not waiting until you get the growth and then saying, 'OK, now you can spend the money,' " he said.

Emmett stressed the difference between debt backed by property taxes and that backed by revenues, such as tolls paid to the Harris County Toll Road Authority.

Combs acknowledged that "there is plenty of good debt" that voters approve to help finance highway and water-related projects, for example. Still, she charged that too many governmental bodies are piling up debt without regard to its impact on future generations of Texans. "Have they done all their due diligence? Have they tried as hard as they know how to be strategic, to be careful?"

Combs suggested several ways to make debt obligations more transparent. As new debt is presented to voters for approval, her report recommended including on the ballot the amount of outstanding debt, debt service, per capita obligation, the amount of new debt, estimated debt service and the estimated per capita burden for proposed bonds.