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City officials say no to bond elections before 2026

Friday, April 28, 2023 by Jo Clifton

The city of Austin has promised voters it would build a wide variety of projects, ranging from roads to affordable housing to parks, libraries and health centers.

City financial advisers told the City Council Audit and Finance Committee on Wednesday that the total authorization for public improvement bonds is currently at $3.5 billion. But because the city has “an enormous amount of unissued debt – $1.8 billion,” in the words of interim City Manager Jesús Garza, it is not advisable to have another bond election until 2026.

There was agreement on that conclusion from the city’s financial staff, including Chief Financial Officer Ed Van Eenoo, Deputy Chief Financial Officer Kimberly Olivares and City Treasurer Belinda Weaver. The city has gone to voters for bond approval every other year since 2016.

Credit: City of Austin

An appetite for mobility improvements in 2020 – $460 million in property tax-supported bonds – led to an out-of-cycle bond election, which voters approved.  Considered together with previously approved transportation bonds, the city still has a balance of more than $803 million in unspent mobility bonds.

Voters also approved affordable housing bonds, of which more than $360 million has yet to be spent.

Garza asked members of the committee rhetorically, “What happens when you can’t run a bond program on a timely cycle? Those estimates that were done in the early years” are no longer valid. He added, “By the time you get to implementing them, there’s not a way to achieve the objective that the voters and the public expect because you’ve got a project that’s exploding in terms of costs.”

Further, Garza said, the city has allowed “for people to put a wish number together” for some bond projects, but the number is not accurate because “we didn’t cross all the t’s and dot all the i’s.” He noted that he had created a new Capital Delivery Services Department in March, naming James Snow to lead it on an interim basis. Snow moved over from his previous job as interim director of Public Works.

Olivares explained that the new department would work to implement a consistent approach to capital delivery across the city, with an emphasis on challenging existing processes to find a way to “complete projects in half the time.”

Snow said one way he would do that would be to allow various parts of projects to proceed at the same time when feasible, instead of sequentially, as has been done in the past. “The one place that we’re focusing on first is the design phase,” Snow said. “The goal I’ve been given,” he said, is to “reduce the number of years it takes to design a project.”

Snow said it usually takes seven to nine years to design a project but “we’re going to do it in four to five.” He added, “We’re looking at permitting and the way that we actually do the design work so we can take that phase from three to four years down to one year to 18 months. That includes permitting and coming to you all for the authorization to go into construction.” He also said that construction was not a weak point. The city is doing construction in about three to four years.

One important change that Snow emphasized is that when staff comes to Council with a project, it will not be a concept. “We’ll give you a scope, schedule and budget, so you can hold us accountable.” Council will be able to see the budget and how the project will be delivered, he added.

Council Member Alison Alter, who chairs the committee, said when Council was considering whether to have a mobility bond election in 2020, a question arose about how those bonds might impact the city’s ability to borrow more money in the future. The lower a city’s bond rating, the higher its costs to issue more bonds.

Weaver explained how bond spending has impacted the city’s bond rating, and why it is important to carefully manage bonds and certificates of obligation. Prior to 2020, she said, all three bond rating agencies had rated Austin’s bonds at AAA. However, in 2020 Moody’s and Fitch both lowered the city’s rating.

Council Member Vanessa Fuentes noted that in the last few months, Council approved a “library vision plan that set out the needs of our library system, including … adding new libraries across the city and expanding certain libraries. But all of that would, of course, be funded through a bond proposal.” Knowing that staff was recommending no bond elections before 2026, she asked what steps staff would recommend.

Olivares said, “Vision plans like the library one you just recently approved, they are incredibly important when it comes to our capital improvement program planning process.” However, she warned Fuentes that financial services needs to dig into what the city is currently committed to doing, how money is allocated and what may or may not be possible. She promised the committee that staff would return with updates as they assess the situation.

Van Eenoo addressed the committee at the end of the presentation, stressing that the city has “a substantial amount of authorized but unissued bonds. It is going to take us a while to work through that. We do have a new capital delivery approach that we are working on – this is going to speed up. But it’s a lot and it will take a while to work through that. We’re going to have to manage it prudently against our credit ratings and those metrics. … It’s going to be a while before staff will come forward seeking additional voter approval for more bond money. We’ve got a full plate and we need some time to work to what we have on our plates.”

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