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Business & Labor
Bond Bell Ringing in Texas
(texas.construction.com,
October 2006 issue)
By Eileen
Schwartz
When Texas voters cast their ballots
next month for one of the state's four leading gubernatorial
candidates, they will also decide the fate of approximately
$3.5 billion in bond programs on the local ballots of 52 independent
school districts. Bonds that pass will finance new facilities,
upgrades and repairs to public schools.
The $3.5 billion figure comes
from the Municipal Advisory Council of Texas, a nonprofit
organization based in Austin that supports the municipal bond
industry. MAC figures show that seven districts have prepared
bonds in excess of $200 million while four districts have
bonds of more than $100 million.
Funding for education has topped the
agenda in the debates this fall among incumbent Gov. Rick
Perry and his three chief rivals for the job of Texas governor-Democrat
Chris Bell and independents Kinky Friedman and Carole Keeton
Strayhorn.
The decades-old battle in the state
over school finance reform intensified after the Texas Supreme
Court ruled in 2004 that the state's school finance system,
known as the "Robin Hood" initiative, was unconstitutional.
In November 2005 the court gave the
state a June 2006 deadline to implement a new revenue source
to lower school maintenance and operation taxes, reduce public
school districts' dependence on school property tax and provide
for local discretionary taxation. .
The 79th Texas Legislature complied
with the ruling in May by passing a tax-reform package in
a third and final special session called by Perry. Many politicos
say the legislation resolves the state's school finance crisis.
Others see it as nothing more than a means of getting out
from under the court's order.
While the legislation didn't have a
major effect on school bonds, "it did help remove the
uncertainty that's been floating around for several years
about how to fund schools," says Chris Huckabee, chief
executive officer for Fort Worth-based Huckabee Inc., an architecture,
engineering and program-management firm that offers bond planning
and public relations to independent school districts.
"The focus was on the maintenance
and operational side of the balance sheet not the capital
improvement side."
He adds that the state did give some
property tax relief that would offset local taxes. "We
anticipate that the reduction in property tax might prompt
voters to say yes [to bonds]."
The real impact on school bond referendums,
however, is the change in allowable vote dates, says Huckabee.
New state legislation required that, starting this year, school
districts hold bond elections on the general election dates
in May and November.
"While this might have sounded
great in theory, the reality has been less than desirable,"
he says.
Conforming with the general election
dates means that many voters will need to become acquainted
with new polling sites because many school districts don't
fall within city or county lines.
Another complication, Huckabee points
out, is that most general election ballots are packed with
propositions "leaving school bonds hidden well down on
the ballot."
Huckabee adds that when bonds were voted
on throughout the year, construction was spread more evenly
throughout the year.
"Today bonds are sold in a tight
market because they are voted on at the same time," he
says. "Given the typical supply and demand theory, we
have more bonds and fewer buyers, meaning interest rates are
higher. Construction also gets grouped together, meaning more
work floods the market at certain times with wider gaps in
the frequency of new projects. The end result is higher bond
interest rates and higher construction prices."
The first round of bonds under the new
legislation was placed on the ballot in May.
Huckabee says his clients had a 100 percent pass rate, but
the margin of victory wasn't as large as in past years.
Outside of Huckabee's client base, the
May bond referendums saw mixed results "just as we have
in the past," he says. "School districts that have
a solid plan and do a good job of presenting the facts to
their taxpayers normally come out on top."
For ENR's national coverage of
the upcoming election, go to www.ENR.com.
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