The (Municipal) Bonds of Community

The City of Plano is now accepting applications for eight Plano citizens to serve on the 2021 Bond Referendum Citizens Advisory Board. Read on to learn how it all works. Applications can be submitted here through May 15th:

Approximately $300 million in new bonds could be proposed on the ballot in the 2021 Plano municipal election. This is a hefty sum, especially after our economy just took a massive gut punch. I'll break it down into three parts: what's the point of municipal bonds anyway, the 2021 bond referendum, and what you can do to make your voice heard.

The Point of Municipal Bonds

In the business world, debt, like a stock offering, is a useful mechanism to finance the growth of your business, where the idea is that if you borrow money at at a certain rate of interest, you can use it to generate more money than you have to pay back by investing in your business, growing it, and earning more money.

However, government doesn't produce anything of marketable value, so municipal bonds are more like your personal debt. You take out loans for big things that you expect to last a while, like a home or a car. You don't take out a loan for your weekly grocery shopping. Municipal finance works the same way. You have routine, ongoing expenses, and then you have the occasional big stuff. Your property tax rate is broken down into two categories, which combine to determine your overall tax rate:

  1. Maintenance & Operations (M&O) rate: as the name suggests, this is for day-to-day operations, like staff salaries and paying the bills

  2. Interest & Sinking (I&S) rate: this is just a confusing way of saying "payment on debt"

The city takes on bond debt for the same reason you take on a mortgage: even if you could afford to pay for your house all at once, it would be incredibly painful to do so, and making regular payments provides some stability, so you don't need your going up and down like a roller coaster every few years as you incur large costs. In addition, local governments have an even better reason to do so--to make sure the people benefiting from an expense are the ones paying for it.

The police officer who responds to your call this year is paid for this year from M&O taxes collected this year. He may retire next year, and while we'll miss him in the Plano PD and wish him well, you won't still be paying next year for the income he earned this year. Roads, however, are not only really freaking expensive, but they also have a lifespan of thirty or more years. Unlike the police officer, who earns his paycheck one day at a time, a road is paid for all up front when it's first built. By issuing a 30-year bond to pay for the road construction, I&S tax receipts will be used to repay that debt, plus interest, over a 30-year period, which means that if you move out of Plano next year (we'll miss you too), you aren't stuck with the entire bill for a road you're no longer going to use.

And so bonds are a necessary component of municipal finance, but you, the voter, hold the power to approve them.

The 2021 Bond Referendum

You might have noticed we have a bit of a traffic situation in Plano (or did until the coronavirus pandemic). Not only have we exceeded the planned population, but we're also the only thing standing between the rest of a rapidly growing North Texas and Dallas, resulting in a lot of through traffic. This means our roads have taken a real beating. Roads have a lifespan of about 30 years, and guess when a fair bit of our city was built out? That's right! About 30 years ago. A road can only be repaired so many times before it needs to be replaced.

There's other work to do, of course, to facilities such as libraries, and to parks, and infrastructure. All told, it's estimated to amount to $300 million. Given what just happened to our economy in the pandemic, are we going to recommend we spend that much? That depends on how critical the work is, and on the recommendations of the 2021 Bond Referendum Citizens Advisory Board (application link again for reference... hint, hint:

The committee will make recommendations to the city council, which will approve what to put on the ballot, and how it's categorized, but the voters have the ultimate say as to whether a bond is approved.

What you can do about it

You're already ahead of the curve simply because your'e engaged enough to read this. Before we discuss anything else, recognize one simple truth. We purposefully plan and incur bond debt to keep your tax rates relatively steady and predictable. This means that when we have new work that needs to be done, we time the bond issuance to correspond with the retirement of old bonds when they're paid off, again, so we don't have dramatic peaks and valleys in expenses.

BUT! When you hear that approving the bond "won't affect your taxes," that means only that your current tax rate won't increase if the bond is approved (specifically because it will take the place of old, paid-off debt). It does NOT mean you won't pay for it. You will pay for every last dime. There isn't an expense incurred by government that isn't paid for by the taxpayers, so recognize what this really means. It also means that if the bond is not approved, the I&S portion of your tax rate would go down. But should it? That's up to you. Government at all levels have legitimate expenses, but in America, we answer to YOU.

So first, you can apply to the Bond Advisory Board. You can also speak at the public hearings and at the city council vote regarding the bond referendum to make your voice heard. Likewise, you can help educate your friends and neighbors in the community, and encourage them to get involved. Last, but certainly not least, you can vote in the May, 2021 Plano municipal elections.

117 views0 comments