Council could raise water rates, not taxes, to pay note
Walker County News Today Staff
Huntsville City Council wants to get taxpayers in an additional $80 million worth of debt and is looking for creative ways to pay the note without raising taxes.
After several workshops with Houston-based engineering and design firms PGAL and Freese and Nichols on the condition of city hall, the service center, public safety facilities and city water and wastewater plants, Council is working to meet an August deadline to get the bond issue before voters in November.
The ballot likely would include four propositions describing capital projects with a combined price tag of $80 million, which would be added to the city’s $36 million in existing debt.
New bond funds would go toward new construction and/or upgrades to city hall and the city service center, a new public safety center that would house both the city’s police and fire departments, and upgrades to wastewater treatment plants, among other things.
At a workshop last week, Council members — with the exception of Ward 3 Council member Ronnie Allen, who was absent — discussed strategies for selling the bond to voters. These strategies, in a nutshell, include the following:
- Promising they don’t intend to raise property taxes — while admitting, if pressed, that they might have to;
- Asking voters to approve a bond for a “not to exceed” amount that will include a healthy contingency fund as a hedge against contractor mistakes, gold-plating and cost overruns;
- Using “ballot psychology” to stack the order of the ballot items from “most acceptable” to “least acceptable”;
- Raising rates on the sale of water to TDCJ, the city’s largest water user, to pay off bond debts; and
- Stifling public dissent among Council members to present a united front to voters.
Read Their Lips
The city has other options in addition to raising water rates on TDCJ to pay off bonds without raising taxes, City Manager Matt Benoit told Council members last week.
For example, the city’s Chapter 380 sales tax abatement agreement with the Ravenwood Shopping Center developer expires in 2019, which Benoit said would double the $350,000 or more in annual sales tax the city now collects and gets to keep from those retail developers. The city will also retire debt in 2019, which frees up a portion of the 11 cents of the current property tax rate of 38.38 cents per $100 property valuation now devoted to debt service.
Benoit and Council members such as Don Johnson and Keith Olson stressed that the city should promise taxpayers Council didn’t intend to raise taxes. However, Johnson joked, he wouldn’t “swear on a stack of Bibles” that he wouldn’t vote for a tax hike.
Johnson, at-large Council member Lydia Montgomery and Ward 4 Council member Joe Rodriquez make up the Council’s long-range planning committee, which came up with the city’s $80 million capital plan.
“There’s no way we can guarantee that we wouldn’t raise taxes if we had a huge cost overrun,” Rodriquez said.
Olson said Council would not raise taxes to cover the bond note because of the lag time in collecting the necessary revenue — Council would instead “manipulate” water rates for a quicker return.
Council members didn’t discuss at this workshop how raising water rates to pay for a new city hall would affect the city’s outside water customers, who can’t vote in the bond election. These would include state of Texas taxpayers, who fund TDCJ’s purchase of water, and the residents of subdivisions like Timberwilde, Summer Place, Sterling Ridge and others.
Unfortunately, Benoit told those Council members who prefer not to use the T word in bond ballot language, they can’t avoid all mention of ad valorem taxes. The city’s credit rating is determined by how creditors assess the city’s ability to raise the necessary revenue through taxation, among other means.
Contractor mistakes and project overruns are not the exception in Huntsville. Consider the multi-million-dollar design and construction gaffes and cost overruns associated with projects such as the 2011 upgrades to the Trinity River Authority surface water treatment plant, the Poncho Roberts Aquatic Center in 2008, Veterans Memorial Parkway, the golf course, the Wynne Home, the Daisy Lane Fire Station — etc.
It’s little wonder that Council wants to pad this bond figure with extra dollars.
Interested in the model used by two large wealthy Texas suburbs — Leander, near Austin, and Allen, near Dallas — that passed mega-millions in bonds last May, Huntsville’s City Council examined bond language that would allow them to ask for more than the $80 million they think they need. Voters can expect the November ballot to ask for an amount “not to exceed” $100 million, according to Council workshop discussion.
‘The Political Crap’
Council hopes to do better than it did last November with the defeat of a proposition to spend $625,000 annually to fund an economic development program. Three of four mayoral candidates, including the at-large Council member who won, opposed the measure.
This season, a Council majority plans to marshal a united front in favor of this bond issue.
Ward 2 Councilmember Trish Humphrey and Johnson urged consensus and unity when it came time to roll out a sales pitch and to fight off negative press questioning the need for a multi-million dollar expenditure of taxpayer funds. Johnson said if he couldn’t get behind the bond, he would at least “keep (his) mouth shut.”
But Olson said skeptical voters are at fault.
“The problem is not a united Council. The problem is the political crap we live with in this town,” he said. “This is not a political question to me, but we’ll make it that way somehow. This poor little town will try.”
City taxpayers have not entertained a bond issue since HISD’s unsuccessful $65.5 million attempt in May 2013, which went down in a heated political fight.
Council members discussed arranging the order of the ballot propositions to the city’s advantage. That means putting the proposition they think voters are most likely to accept first in the hope that once voters check “in favor of” for the first one, the momentum of a positive frame of mind will propel them to check “in favor of” the rest.
“If you scare them on the first one, you’ve lost them. You’re done,” Olson said.
At this workshop, Council didn’t discuss the need for an $80 million capital plan, which was developed by its long-range planning committee. But those present at last week’s workshop did endorse it, and they agreed on the need of an “elevator speech” of key talking points to convince voters.
Charter vs. State Law
Benoit asked Council members if they wanted to consider violating Section 11.17 of the city’s charter — thus approving the $80 million capital plan debt without an election.
Section 11.17 prohibits Council from issuing debt that exceeds two-tenths of 1 percent of the net taxable value of property on the city’s tax rolls without the approval of the voters. Currently, that limit is $2.8 million. Benoit told Council that state law imposed no such limitation.
In Home Rule cities, however, the voter-approved charter is the law, and a less restrictive state law doesn’t offer an alternative to a maverick City Council.
At this workshop, Council dropped the matter without much discussion.