Fort Worth’s Bond Election

Fort Worth’s Bond Election

On May 5, Fort Worth voters will go to the polls to decide on the largest bond proposal in city history. The $399.5 million election is split between six propositions, the largest of which provides $261.6 million for street improvements.  The rest of the money will be spent on a plethora of public goodies, including public art, parks, libraries, and a new 28,000 square foot police station.   The city council voted unanimously to call the election, and Assistant City Manager Jay Chapa has stated that the package will not result in a property tax increase.  Fort Worth’s growing population requires this bond package, City Manager David Cooke has said, and might even need such referendums “every four or five years”.[1]

These types of municipal bond packages are common, and usually pass easily.  The turnout for such elections are typically very low, and the proposal is an easy sell for politicians: vote “yes” and you’ll get all sorts of popular government spending, without having to worry about higher taxes.  Politicians get their ribbon-cutting ceremonies, and the voters get the potholes filled-in and improved libraries.  It seems like a perfect win-win for everyone involved.

But of course, what Milton Friedman taught us a long time ago still stands: TANSTAAFL – there ain’t no such thing as a free lunch.  The money must come from somewhere, and that means out of the pockets of taxpayers today and in the future.  And just like when a family uses a credit card to pay for home improvements or groceries, it is not just the money that must eventually be paid back, but also interest and fees.  According to the city’s 2018 Budget, Fort Worth’s outstanding municipal debt obligations currently stand at $923 million.[2]  In fiscal year 2018, debt servicing will account for approximately 12% of city budget expenditures[3].  Some back of the envelope math suggests that an additional $399.5 million debt would increase the city’s debt load by 40%.  Make no mistake: this money will be paid back, with additional money going not to road improvements but to the pockets of municipal bond investors and financial industry professionals who handle the paperwork.  And remember, city officials expect to repeat this potentially twice per decade.

Is this the best that Fort Worth can do?  Of course, we all want quality roads, shiny libraries, and a well-equipped police force but is nearly a half a billion dollars in new debt the best way to accomplish this?  We pay taxes to provide for public goods, and elect representatives to prioritize and plan for the future.  If road improvements are necessary, perhaps the wisest course would be to identify the most pressing projects, plan for them, and pay as we go in order to avoid paying extra in interest and fees.  Some debt is unavoidable, but perhaps such bonds should be smaller and more targeted in order to minimize the risks and costs passed on the taxpayer.

Texas is growing, and this is an exciting time to be in the Metroplex.   However, we must be careful not to repeat the debt-fueled overspending mistakes that have resulted in so much misery in other parts of the country.  The money has to come from somewhere – even in bond elections.

Michael A. Wood is the President and Founder of the Lone Star Policy Institute

[1] “Fort Worth City Council studies $399M bond proposal to meet growth” 2018 3 February, http://www.fortworthbusiness.com/news/government/fort-worth-city-council-studies-m-bond-proposal-to-meet/article_9fade08c-092f-11e8-9da7-ff96574981d9.html

[2]City of Fort Worth’s fiscal year 2018 budget, http://fortworthtexas.gov/budget/fy2018/

[3] “City of Fort Worth, Texas FY2018 Adopted Annual Budget and Program Objectives”, page 33 http://fortworthtexas.gov/performance/budget/FY2018/pdf/FY2018-budget.pdf

Photocredit: aneese – www.123rf.com