Vote No Houston Bonds November 6, 2012 pot

Texas Local Debt in Perspective - Overview • Local governments in Texas issue debt to finance construction and renovation of government facilities i.e., schools, public safety buildings,

Vote No Houston Bonds

November 6, 2012

Houston Community College $ 425,000,000.00

Houston Independent School District 1,900,000,000.00

Vote No Houston Bonds

Definition of a Bond

(Webster’s New World Dictionary)

1) anything that binds, fastens, or unites

2) shackles

3) a binding agreement

4) an obligation imposed by a contract, promise, etc 5) the status of goods kept in a warehouse until taxes

or duties are paid

6) an interest-bearing certificate issued by a

government or business, redeemable on a specific date…

http://www.brb.state.tx.us

Texas Local Debt in Perspective - Overview

• Local governments in Texas issue debt to finance

construction and renovation of government facilities (i.e., schools, public safety buildings, city halls and

county courthouses), public infrastructure (i.e., roads, water and sewer systems) and various other projects authorized by law Key factors that affect a

government’s need and ability to borrow funds for

infrastructure development include population

changes, revenue sources, tax rates and levies, interest rates and construction costs Local governments issue two main types of debt – tax (general obligation or GO) and revenue General obligation debt is secured by the full faith and credit of the issuer’s tax revenue while

revenue debt is secured by a specified revenue source

The BRB separates the local government

issuances into seven categories:

• Community Colleges (CCD)

• Public School Districts (School Districts)

• Cities, Towns, Villages (Cities)

• Water Districts (WD)

• Counties

• Other Special Districts (OSD)

• Health/Hospital Districts (HHD)

Moody’s Long Term Obligation Ratings

Total debt per capita (tax-supported and revenue) increased by 1.2 percent from $7,416 in FY 2010 to $7,507 in FY 2011 Debt per capita has increased by 72.2 percent ($3,148) since 2002; the state’s population has increased by 17.9 percent (3.9 million)

over the past 10 years

Illustrates the local debt outstanding over the past 10 fiscal years

Debt Service

• Debt service is paid from either an ad valorem tax or various revenue streams such as tuition, technology and miscellaneous fees or lease

revenue

Capital Appreciation Bonds

• Capital Appreciation Bonds are sold at a discounted price called the par amount Interest compounds semiannually and accumulates over the life of the bond, and the amount paid at the maturity is called the maturity value Interest rates for CABs are generally

higher than bonds with current-pay interest This structure keeps payments low in the near term and delays interest payments until maturity The total debt outstanding figures are understated to the extent that these bonds are reported at their par issuance price

rather than their maturity value

• Premium CABs provide a lower initial stated par amount and are

issued to: (1) raise additional proceeds, (2) preserve debt limit, and (3) help local governments reach tax-rate targets Local

governments issue more premium CABs than non-premium CABs

Certificates of Obligation

• During fiscal 2011 local governments issued $1.56 billion in Certificates of Obligation (CO) or approximately 6.3 percent

of the total debt issued (Table 1.6) Debt service for COs is

paid from ad-valorem taxes and/or revenues and do not

require an election unless a valid petition requesting an

election is presented

• Certificates of Obligations are authorized by the Certificate

of Obligation Act of 1971, Subchapter C of Chapter 271 of the Texas Local Government Code and are issued to pay for the construction of a public work; purchase of materials, supplies, equipment, machinery, buildings, land, and rights- of-way; and to pay for professional services such as

engineers, architects, attorneys and financial advisors

Build America Bonds

• Build America Bonds were created by the American

Recovery and Reinvestment Act of 2009 and could be

issued as Tax Credit BABs or Direct-Payment BABs Tax

Credit BABs provide a federal subsidy to investors equal to 35% of the interest payable, and Direct-Payment BABs

provide a direct federal subsidy payment to state and local governmental issuers equal to 35% of the interest payable Authority to issue BABs expired in December 2010

• Texas local governments accounted for approximately 6.0 percent ($10.94 billion) of the national BAB issuance of

$181.26 billion

Houston Community College

The Board of Trustees of the Houston Community College haven’t been good stewards of our tax

dollars They have squandered away the hard

earned resources we have already given them

Don’t reward them with more money to waste

Vote No on November 6

Texas Association of Community Colleges

www.tacc.org

Tax Increase

• Current rate per $100 is 0972220

• Proposed rate per $100 is 1201220

23.6% Tax Increase

Community College Districts

• As of August 31, 2011 Community College Districts

with tax-supported debt outstanding had a per student debt of $4,916, a decrease of 4.0 percent ($206) from

FY 2010 Since fiscal year 2007, the state’s per student tax-supported debt has increased 42.3 percent from

Student Enrollment Declining

Westheimer

Swamp Land

$8,300,000.00

O’Quinn Antique Car

Warehouse

$7,950,000.00

Planned Parenthood

Property

$5,000,000.00

Houston Community College

• $43,000,000 5 year investment in the

Community College of Qatar

C-Ring Campus West Bay Campus

Houston Community College

Qatar

Fiduciary Responsibility

The board members who create the financial problems seldom suffer the economic

consequences of their actions, but instead

sometimes benefit from them, and in the end, always leave the tax payers to pick-up the tab

Houston Independent School District

The Board of Trustees for the Houston

Independent School District hasn’t been good

stewards of our tax dollars They have

squandered away the hard earned resources we have already given them

Don’t reward them with more money to waste

Vote No on November 6

Houston, City of

The City of Houston hasn’t been good stewards of our tax dollars They have squandered away the hard earned resources we have already given

them

Don’t reward them with more money to waste

Vote No on November 6

City of Houston Facts

The City of Houston had a decline from 2010 to 2011 in population of

150,718 1

The City of Houston has a larger accumulated operating loss

(expenses greater than revenues) than the City of Detroit

Houston $2,143,115,000 2

Detroit $1,590,416,800 3

1- 2011 City of Houston CAFR pg.227

2- 2011 City of Houston CAFR pg.3

3- 2011 City of Detroit CAFR pg.15

From the City of Houston Monthly Financial and Operations Report dated August 31, 2012, Comparative Projections states that the

city’s expenses exceed their revenue by $11,210,000 YTD

The projections of expenses exceeding revenues for 2013 are:

Controllers Office: $75,292,000

Finance Office: 42,232,000

Both the City Controller and the Finance Department

show that the City’s current (high) revenues can’t even come close to servicing its current operating expenses and current debt, let alone more debt!

The mayor wants to issue $410 million in new bonds and says it won’t raise taxes?! Who is she trying to kid?!

Will there be a tax increase?

1,800,000 1,900,000 2,000,000 2,100,000 2,200,000 2,300,000

2002 - 1,979,052

2011 - 2,257,926

2012 - 2,107,208

City of Houston Population

-6.7% Decrease in Population Between 2011 - 2012

488% HCC Debt Increase 312% HISD Debt Increase 60% City Debt Increase

Declining enrollment at HCC and HISD and declining population in the City of Houston, coupled with an exploding debt, is a recipe for financial slavery and bankruptcy for our children and grandchildren We cannot afford more “Bond Debt”

VOTE AGAINST ALL BONDS Dave Wilson (713)699-4488

wilson@southwestsigns.biz

Debt per Capita

• Houston has the highest tax-supported debt per

capita ($1,646) of the Big Six as of August 31, 2011

Dallas ranks second with $1,526; Austin ranks third

with $1,472 followed by El Paso with $1,352, Fort

Worth with $1,002 and San Antonio with $985

tax-supported debt per capita (Figure 2.5)

• San Antonio has the highest revenue debt per capita ($6,115) of the Big Six as of August 31, 2011 Austin

ranks second with $5,253; Houston ranks third with

$3,233 and El Paso with $898 revenue debt per capita

City of Houston - Fiscal Year 2011 Outstanding General Obligation Debt

Fiduciary Responsibility?

• Unfunded City of Houston Pension Liability is

$4,500,000,000

• Accrued Budget Deficit is $2,500,000,000

• Houston is $7,000,000,000 upside down

(almost 1/2 of California’s total debt)

• Property Tax Debt has increased 74% in the last 10 years