Critics Say Bond Elections Lack True Transparency

Bypassed by the Miracle

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It was a powerful lineup of Texas Republicans who joined Comptroller Susan Combs early last year at a state Capitol news conference. Standing alongside the state’s chief financial officer was Lt. Gov. David Dewhurst and the Legislature’s chief budget writers, House Appropriations Chairman Jim Pitts of Waxahachie and Senate Finance Chairman Tommy Williams of The Woodlands.

They were there to endorse a series of measures championed by Combs aimed at ensuring Texans knew exactly what they were voting on when asked to approve the issuance of local debt.

“We have a very populist form of government here,” Williams told reporters. “Folks like to know what their government is up to.”

Despite the high-profile support, the bills never made it to Gov. Rick Perry’s desk, knocked out of play by parliamentary maneuvers in the House. A year and a half later, Combs said she did not expect the level of opposition the bills received.

“Everybody who was at the local debt public trough hated this bill,” Combs said. “I am still astonished by how much good stuff gets killed by people who don’t want you to know.”

Over the last decade, Texas voters have been asked by local government entities to approve billions of dollars in new debt, much of it related to helping cities and school districts maintain services amid the state’s fast-paced population growth. Local entities borrow money to do everything from building schools to paving roads. 

The majority of bond measures are approved at elections, often with the help of campaigns funded by companies expecting to pick up some of the infrastructure work. Local counties, cities and school districts argue that the high success rate is because the bond elections reflect local interests. However, a growing group of critics say that voters aren't being properly informed of the debt already owed by their local entities before they head to the ballot box — and that proper context would affect the outcomes.

“Voters right now do not have the type of financial information they need to make an informed decision,” said James Quintero, director of the Center for Local Governance at the conservative Texas Public Policy Foundation.

More details on ballot measures?

The measure proposed during the 2013 legislative session would have required bond proposals that go to voters to include detailed information on the ballot about the entity’s existing debt obligations, including the amount outstanding per capita. Supporters argued that voters often don’t realize the amount of debt a local entity already owes before they vote to add to it. 

Detractors countered that voters might be confused by the information. They stressed that certain kinds of debt, such as debt issued by city-owned utilities, are technically backed by taxpayers but are in practice paid back through user fees, something that would be hard to explain on a ballot.

“We think that debate and that information has to be to the voters well before they get to the ballot box,” Donald Lee, executive director of the Texas Conference of Urban Counties, said at a March 2013 hearing on the proposal.  

Combs said that argument was like saying “we’re too stupid to know but smart enough to pay.”

“I had the mayor of Austin tell me to my face that if the public knew they already owed over $1 billion in debt, they’d be angry,” Combs said. “I said, ‘It’s their money.’” Austin has $1.25 billion in outstanding tax-supported debt, according to the most recent data collected by the Texas Bond Review Board.

Austin Mayor Lee Leffingwell said he did not recall having such a conversation with Combs. While he said he was opposed to several aspects of the proposed bill, he stressed that it wasn’t because he wanted to hide information from voters. “I’m a little bit offended that someone is saying we don’t want the voters to know how much debt we have,” Leffingwell said, noting that the city maintains that information on its website. (Combs' office has also launched a state website to highlight how much money local governments owe.)

Leffingwell said it would “take a huge amount of space on the ballot and be very confusing” to include outstanding debt, and that he remembers talking to some of Combs’ staff “about the problems that might present in terms of making the ballot intelligible.”

Leffingwell and other local leaders from around the state were also opposed to a provision in the bills backed by Combs that would have restricted the use of certificates of obligation, or COs, a tool employed mostly by cities to issue debt without getting voter approval. Combs described as “insidious” the way cities issue COs to borrow money, which they may use largely for contracts on infrastructure projects. In fiscal year 2013, CO debt represented $9.4 billion — 34 percent — of the total $27.7 billion in outstanding debt maintained by Texas cities, according to state records.

Leffingwell said COs are valuable tools that give cities flexibility in their spending. Sometimes, he said, a city needs to issue debt quickly to get a project moving, like when the city worked out the details of highway flyover interchanges in South Austin with the Texas Department of Transportation. Waiting for one of the two times annually that the state permits bond elections – May or November – was not an option.

“If we waited around for the next election, then that opportunity might not have been there,” Leffingwell said. “Sometimes, for reasons that have to do with simple practicality, it’s not the best practice to wait until the next election to do it.”

The two bills that encompassed Combs’ transparency proposals — Senate Bill 14 from Williams and House Bill 14 from Pitts and several other lawmakers — both failed in the House under parliamentary maneuvers called points of order. State Rep. Trey Martinez Fischer, a San Antonio Democrat who helped kill HB 14, said he had several concerns with the bill, including whether the local entities were being unfairly punished for borrowing money.

“I’m always for more transparency,” Martinez Fischer said. “I think the state should do a better job owning up to the responsibility that we intentionally short our cities and schools when it comes to funding their basic services. Oftentimes that does require local governments to do more, by way of either issuing debt or raising taxes.”

New proposals scrutinized

Despite the measure’s failure last year, some local entities are still facing increased scrutiny of their bond elections.

In North Texas, the Birdville and Keller school districts are planning bond packages for November. Some conservative groups, including Empower Texans and the recently formed Direct Action Texas, have publicly questioned whether either district’s voters will be properly informed of the current spending and debt levels.

“I’m not focusing on their debt, per se. That’s a decision that the voters have to make,” said Aaron Harris of Direct Action Texas. “We’re taking a position on the transparency.”

Keller officials met with some of the activists this month and were agreeable to some of their requests, including listing information about the district’s outstanding debt on the ballot, according to district spokesman Bryce Nieman. After the meeting, district officials learned from the Texas secretary of state’s office that state law does not allow a local entity to include such information on the ballot, he said.

“We were fine with adding that as a district, but obviously we’re not going to be able to,” Nieman said.

In Williamson County outside of Austin, resident Daniel Wofford of Taylor had concerns about last year’s proposed bond elections for $275 million in road projects and $40 million in parks and recreation projects. Among his reservations was that the donors to the leading group advocating for both bonds’ passage, Citizens for Better Williamson County Transportation, was funded largely by firms that have previously received work from the county paid for by earlier bond elections.

“The same group that goes through all the effort to get it passed is the same folks that benefits off of it on the other end,” Wofford said.

Local government entities are allowed to educate voters on upcoming bond elections but are prohibited under state law from explicitly campaigning for them. Specially created political groups often form to pick up the slack — and their financial backers frequently include firms that may eventually win contracts for bond projects.

“That’s been my experience,” Combs said. “The construction firms, the architectural firms, the engineering firms all cough up several thousand bucks, and that swamps anything Tom and Mary public want to do.”

The American Council of Engineering Companies of Texas (ACEC Texas) gave $10,000 to Citizens for Better Williamson County Transportation and has been a past contributor to groups supporting bond elections around the state. ACEC Texas president Steve Stagner said that engineering and construction firms have nothing to hide in their political activity, noting that the campaign finance reports of the “vote yes” groups are publicly available.

“It is easy for citizens to digest that information and then make their decisions on the merits of a bond issue and whether they favor the construction that will result,” Stagner said. “In a digital age, it is pretty simple and cheap for Tom and Mary public to mount a campaign against anything they oppose.”

Both Williamson County bond proposals passed, one with 55 percent of the vote, the other with 66 percent. At least three firms that donated to Citizens for Better Williamson County Transportation have been selected as the “highest quality firm” for projects funded by the bonds, according to county spokeswoman Connie Watson.

Wofford said he is encouraging county officials to make clear at public meetings and in government records when a company that advocated for a bond is gaining county work as a result of its passage.

“Everything on there may be extremely worthwhile, but the way it is promoted is just awful,” Wofford said. “The fact, as far as I know, that none of it is illegal really stinks.”

Disclosure: The American Council of Engineering Companies is a corporate sponsor of The Texas Tribune. A complete list of Texas Tribune donors and sponsors can be viewed here.