Texas cities love debt.
Citing a report from the Texas Bond Review Board, Forbes magazine published an article last fall showing Texas ranking second-worst in local debt. Only New York has a higher local debt.
Particularly embarrassing for Texas’ Republican government is that California is doing slightly better than we are. So much for “don’t California my Texas.”
This is a trend that is only getting worse year after year.
Here’s how this works. Local politicians have pet projects. One such pet project in Tarrant County is the TexRail project, which is really the beginning of commuter rail in the Fort Worth area, aside from the existing TRE (Trinity Railway Express) which connects the city to Dallas.
But politicians in the cities affected can’t pay for TexRail without raising taxes. So under rational budgetary circumstances, the project would die. However, the federal government has stepped in and dangled federal tax dollars in front of those cities, incentivizing them to build the rail lines.
But the feds are only offering to pay half of the $1 billion cost. The rest will be up to the cities through which the rail will pass. But again, local politicians don’t want to raise taxes or blow their entire local budgets to pay for that remaining $500 million. So they take out loans.
Now, these loans are taken out after voters approve them in “bond elections.”
Theoretically, because of the enormous cost of the TexRail, local politicians would not have initiated the project or asked voters to approve bonds to pay for it if it hadn’t been for the promise of federal dollars.
In this way, we see that the federal dollars are actually incentivizing local entities to take on more debt. If this continues, Texas’ local debt will never be brought under control. Sen. Konni Burton has filed legislation to address the issue of federal dollars.
This morning, Burton laid out SB 385 in the Senate Transportation Committee which would require any locality which is accepting federal dollars for commuter rail to get voter approval before accepting those dollars.
Practically speaking, if her bill passes, the voters can refuse federal dollars for commuter rail, meaning the localities would have to shoulder the entirety of the debt. As the voters are unlikely to approve such an eye-popping debt as in the TexRail case, the politicians probably wouldn’t even ask.
Plainly, the lack of federal dollars means no local debt bond election. It could be a big step in bringing fiscal conservatism to local budgets.
So what does the bill mean for TexRail in Tarrant County? If SB 385 passes, and the voters want to stop the rail from being built, they can vote to refuse the federal dollars and the project would die. There is virtually no possible way those cities would approve a $1 billion spending project without the federal assistance.
When the Mayor of Addison testified against the bill, Sen. Kelly Hancock asked if he realized it wouldn’t affect his city. The Mayor said he didn’t know that. Hancock pressed further and asked if he had even consulted with Sen. Burton before forming his opinion on the bill. Again, the official said he had not.
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