TURNER PENSION PLAN INCLUDES LARGEST BOND ISSUE IN HOUSTON HISTORY: BUT YOU DON’T GET TO VOTE ON IT!
by Bill King
Included in the “outline” of the City of Houston’s new pension plan is a proposal to issue $1 billion of pension bonds. If this proposal goes forward, this will be the largest general obligation bond issue ever floated by the City of Houston.
Now you might think that if the City is going to borrow more money at one time than it ever has in its history, you would get a chance to vote on whether that is a good idea. But you would be wrong.
In 2003, Senate Bill 1696 was quietly ushered through the Legislature. It allowed certain cities in Texas, including Houston, to issue general obligation bonds (those are the ones repayable from property taxes) to add money to underfunded pension plans.
But there is no requirement to get voter approval for these bonds and they may be issued in any amount up to the unfunded liability. In other words, under this law our City Council could, at any meeting, authorize up to $8 billion in pension bonds without voter approval, since that is what the City now says we owe to the pensions!
Imagine that. Our City Council can obligate you and your property to pay back billions in bonds and you do no say.
You have to wonder what the Legislature was thinking in 2003 when this law was cooked up. But unfortunately it is part of a trend in the Legislature over the last several decades.
In the early days of our state, our framers generally required voter approval for government to incur debt. Over the years, that safeguard has been whittled back, especially as it relates to municipalities. In fact, in the case of the City of Houston, voters have approved only about 11% of its current $20 billion of debt.
But this proposal to issue an additional $1 billion of debt, the largest in the City’s history, without voter approval is the last straw and must be stopped.
First, amending SB 1696 to require voter approval should absolutely be a legislative priority and passed on an emergency basis as soon as the legislature convenes. Fortunately, Sen. Paul Bettencourt has already said he will file a bill to do so. Any legislator who refuses to support amending this law to require voter approval is no fiscal conservative.
Second, even if City Council can issue a billion dollars of bonds without voter approval that does not mean it should. There is a case to be made to refinance the unfunded pension debt with bonds. Some of you may recall that during the campaign I mentioned that as one of the tools we could use to address the unfunded pension liability under the right circumstances. It is okay to borrow on your home equity to pay off your credit cards, if you cut up the cards. But that is not what is being proposed.
The decision on whether debt should be part of the pension solution and under what circumstances should be made by the taxpayers that will be saddled with the debt payments for the next 30 years. It should not be made by City Council members, most of whom regularly accept large political contributions from City employee groups.
ANY PROPOSAL TO ISSUE $1 BILLION OF PENSION BONDS SHOULD BE SUBMITTED TO THE VOTERS TO APPROVE.
And any Council member that votes to issue a billion dollars of debt without letting you vote on it, should never get your vote again . . . for any office . . . ever.
The article above is reprinted by permission of Bill King. Feel free to submit topical posts/essays for our consideration to [email protected]. As with our usual blog posts, the views expressed are those of the author.