DALLAS – State government bond debt in Texas grew 6.2% to a record $47 billion in fiscal year 2015, according to the Texas Bond Review Board's
At the local level, debt grew 10.4% to $212.4 billion, the BRB reported. "The majority of the debt is at the local level," said Robert Latsha, finance director for the Bond Review Board.
Texas ranked second behind New York for highest local debt per capita but ninth in state debt, according to census data the review board compiled. For state and local debt combined, Texas ranked fifth, the BRB said.
Counting only debt supported by taxes, Texas ranked 44th in debt per capita, according to Moody's Investors Service medians compiled by the Bond Review Board. The 2015 per capita debt supported by taxes was $406, 34% below the $614 listed in Moody's 2014 report.
The Lone Star State made it through the calendar year with its triple-A ratings intact, despite a dramatic reversal of fortunes in the oil and gas industry that brought negative outlooks to some oil producing states.
In the 2015 session that ended May 31, Texas lawmakers enjoyed a bounty from the oil and gas boom that made 2014 a banner economic year. Texas ended fiscal 2015 with a General Revenue Fund cash balance of $11.12 billion, a 1.3% increase from the fiscal 2014 year-end closing balance of $10.98 billion, according to the BRB.
Each December, the BRB reports on state and local debt for the fiscal year that ends Aug. 31. While most state debt requires approval by the board, local issues generally do not, Latsha said.
In the current fiscal year that began Sept. 1, Texas state issuers expect to issue approximately $10.35 billion in bonds, commercial paper and variable rate notes, the BRB said. That includes $700 million of general obligation highway improvement bonds expected to be issued by the Texas Transportation Commission.
The 84th Legislature also authorized $767.7 million of revenue bonds for development of the North Austin and Capitol Complex projects.
Cost of issuance rebounded in FY 2015 after falling to the lowest level on record in 2014. Issuance cost for state bond issuers was $5.40 per $1,000 compared to $4.38 per $1,000 for fiscal 2014.
"The increase was due to a number of smaller issuances during fiscal 2015," according to the BRB.
At the local level over the past five years, debt issuance increased by 59% to $38.78 billion. Over that period, new-money issuance increased by 8% to $15.62 billion, while refundings grew 133% to $23.16 billion.
During fiscal 2015, refunding accounted for 60% of local debt issuance. About 21% was used to finance educational facilities and equipment, 8% was for general-purpose debt, 5.9% financed water-related infrastructure, and 3.1% was for transportation projects.
"Debt issuance reached a record high during FY 2015 largely as a result of the record amount of refunding transactions completed during the fiscal year," the report said. Local issuers saved about $2.49 billion through refunding. Another trend in recent years has been the growth of school district debt compared to debt from towns and cities.
"It used to be that cities had more debt than ISDs (independent school districts), and now the ISDs have more debt than the cities," Latsha said.
Total school district debt outstanding increased by 6.4% to $72.35 billion during fiscal 2015. Of that amount, 98% was voter approved, according to the BRB. In the past five years total school district debt has increased by 13.9% to $72.35 billion.
School district debt issuance doubled from $9.09 billion in fiscal 2014 to $18.17 billion in fiscal 2015. Of the total amount issued, 41.2% was issued as new-money debt, an increase of 39% from the $5.39 billion issued during fiscal 2014. The remaining 58.8% was issued as refunding debt, an increase of 188.3%.
Over the past five fiscal years school district debt issuance has grown by 131% percent from $7.86 billion in fiscal 2011 to $18.17 billion in fiscal 2015. The state's population grew by 6.7% during the same time period.
Dallas Independent School District ranked first in outstanding debt with $2.553 billion or $17,293 per student. Houston ISD ranked second with $2.551 billion or $13,168 per student. Northside ISD in San Antonio ranked third with $2.091 billion or $21,675 per student, followed by Cypress-Fairbanks ISD in suburban Houston $2.069 billion or $19,450 per student, and Frisco ISD near Dallas with $1.742 billion outstanding or $36,367 per student.
Northwest ISD north of Fort Worth ranked first in per-pupil debt with $40,531 on a total of $766 million outstanding.
For Texas cities, total debt outstanding increased by 2.7% to $69.90 billion including commercial paper. Of the amount outstanding at fiscal year-end, 42% was tax-supported and 58% was revenue debt, including $165.7 million of sales tax revenue debt and $633.2 million of lease-revenue obligations.
Tax-supported debt for the state's six largest cities, Houston, San Antonio, Dallas, Austin, Fort Worth and El Paso, was 33% of total city tax-supported debt outstanding. Revenue debt for the six cities was 84% of total cities' revenue debt outstanding.
Over the five-year period since 2011, tax-supported debt increased by 10.2% or $2.72 billion, and revenue debt increased by 12.3% or $4.43 billion.
Tax-supported debt per capita for cities throughout the state increased by 36% from $806 in 2006 to $1,095 in 2015. Over the time period, the state's population increased by 17.9%, or 4.1 million people.
Houston ranked first in tax-supported debt with $3.2 billion or $1,431 per capita, followed by Dallas with $1,700 or $1,327 per capita.
San Antonio had $1.595 billion or $1,111 per capita, while nearby Austin had $1,409 or $1,544 per capita. El Paso's $1.091 billion gave it the highest per capita debt among the top six cities at $1,607. Fort Worth's $743 million gave it the lowest per capita of tax-supported debt at $915.
Texas cities' use of certificates of obligation has grown dramatically in the last 10 years, rising 75% from $5.9 billion to $10.33 billion, according to the report.
Authorized by the Texas Certificate of Obligation Act of 1971, COs are generally issued as tax-supported debt to pay for construction, purchase of materials, supplies, equipment, machinery, buildings, land, and rights-of-way or to pay for professional services such as engineers, architects, attorneys and financial advisors. Debt for COs is paid from ad-valorem taxes and/or a combination of revenues available from other sources.
With the passage of House Bill 1378 that goes into effect Jan. 1, a city may not issue a CO if the voters voted down a bond proposition for the same purpose within the preceding three years, except in the case of public calamity, public health, unforeseen damage to public property, or to comply with a state or federal regulation. Only certain cities, counties and districts are authorized to issue the certificates.
