$230 million and counting, certain Travis County debt drawing concerns

Travis County Commissioners Court building at 700 Lavaca (KXAN Photo/Tom Rapp)
Travis County Commissioners Court building at 700 Lavaca (KXAN Photo/Tom Rapp)

AUSTIN (KXAN) — To little fanfare, Travis County Commissioners approved issuing $23.3 million in debt for construction of a new Travis County Medical Examiner’s headquarters in early March.

Specifically, county officials approved the use of certificates of obligation, a form of debt that does not require voter approval. The medical examiner’s office is just one of numerous of multi-million-dollar projects Travis County is financing with certificates of obligation, a cause of concern for some critics of escalating county debt.

As of 2015, Travis County has the second highest dollar amount of certificate of obligation debt in the state—$230.4 million, or 33 percent of the all tax-supported debt—according to a Texas Bond Review Board report.

Travis County Judge Sarah Eckhardt said certificates of obligation are a crucial tool for financing important projects, they save money in the long run and the county’s debt is well managed.

The Travis County medical examiner’s office has been in dire need of expansion for years. Eckhardt said the office serves a critical purpose in the criminal justice system, and the county has spent

Through the use of certificates of obligation, Travis County approved $2.2 million for the design and over $23 million for the construction of a new medical examiner's office.
Through the use of certificates of obligation, Travis County approved $2.2 million for the design and over $23 million for the construction of a new medical examiner’s office, according to county records.

significant funds to maintain the office’s national accreditation. The ME’s office conducts medical for 36 counties outside Travis, she added.

Aside from the ME’s office, critics such as Austin attorney Jason Nassour say that by using certificates of obligation, as opposed to voter-approved general obligation bonds, Travis County is bypassing voters on big expenditures and racking up significant amounts of debt, which could have dire consequences in the future.

“It is unreal how much money they borrow,” Nassour said. “If you borrow money every year, sooner or later you have to pay it back or you go bankrupt.”

A mix of projects

In the past four years, the county’s issuance of certificates of obligation has nearly equaled, and sometimes exceeded, the yearly dollar amount issued in general obligation bond debt.

In certificates of obligation, last year the county approved about $352,000 for an office window upgrade and $31.6 million the Ronald Earle facility, among other projects.

In 2014, county officials OK’d $2.1 million for information technology services, $2.2 million for design of the medical examiner’s office and $16.6 million on a connection between Pearce Lane and Highway 71 near Circuit of the Americas, according to Travis County records.

Eckhardt said using certificates of obligation allows the county to benefit from its triple-A credit rating and borrow at “incredible” rates.

“To pay cash for these projects would really hamper our ability to respond on an annual basis,” she said. “It’s better to go ahead and stretch it out over a number of years. It’s more equitable on the taxpayers.”

The county also could lose out on good deals, if the decision goes to voters in a bond election that can take months. Bond elections are also an expensive process, Eckhardt said, costing about $1 million.

“You wouldn’t be able to move forward at all, if you had to go to bond for every one of these things,” Eckhardt said.

Local government finance pundit and blogger Bill Oakey said using certificates of obligation to take advantage of the marketplace should be done “on a case-by-case basis.” Oakey said he’s also concerned about transparency, since voters are not called upon to approve the debt.

“There ought to be, at least, more of a process for citizen input,” Oakey said.

Then there’s the issue of affordability in Travis County and Austin, Oakey said. The county needs to slow down the cost of growth.

“How are we every going to get to affordability,” Oakey said.

Voters can stop the sale of certificates of obligation, if five percent of the total voters in the taxing area sign a petition and submit it before the ordinance to sell the certificates is approved, according to Texas Bond Review Board literature.

Nassour acknowledged certificates of obligation are a necessary tool and should be used in certain instances, but they also allow local government to “get away from transparency,” he said.

Nassour ran in the last Republican primary race for Travis County Commissioner Precinct 3. He lost to incumbent Commissioner Gerald Daugherty.

Eckhardt said the county manages its debt carefully, stays within strict guidelines and has a “well thought out policy” with regard to the percentage of debt it takes on compared to its revenue-generating capacity.

In regards to certificates of obligation bypassing voters, Eckhardt said it is in essence a philosophical question of the merits of the current representative democracy or a more direct democracy in which more, or all, spending decisions would go to voters.

“The better thing is to have representative democracy where you have individuals who are steeped in the information and make the decisions,” she said. “If you don’t like the decisions they make, you vote them out of office.”

County  Certificate of obligation amount ($ in million)  Debt per capita  Percent of tax-supported debt
Bexar $1,190.9 $642 78%
Travis $230.4 $200 33.1%
El Paso $141.9 $170 69.1%
Hidalgo $73.1 $88 45.3%
Montgomery $71 $137 17.7%

*Source: Texas Bond Review Board, Finance Office. Population based on July 2014 U.S. Census Population Division. 

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