AUSTIN, Texas — Editor's note: This story has been updated to include the City of Austin's debt repayment schedule and information.
Eight Central Texas taxing entities want voters to spend more money for government bonds.
In Austin, $3.5 billion is on the ballot to pay for City of Austin, Austin ISD and Austin Community College bonds.
Bonds are loans. The U.S. Securities and Exchange Commission (SEC) describes it as an IOU.
The bonds voters approve are usually “general obligation bonds.” The amount on the ballot is considered the face value. It’s what the taxing entity plans to borrow from investors.
The face value will be repaid in a lump sum years later, usually 20 to 30 years later. Meanwhile, interest payments are made to the investors. The SEC website shows interest payments are typically made twice a year.
At the end of the bond agreement, called the “maturity date,” the taxing entity that borrowed money must repay the bond amount in full.
Some taxing entities, like City of Austin, will make principal payments while paying interest.
"The City’s general practice is to pay principal amounts annually, so that the bonds are fully amortized by final maturity and there is no lump-sum payment," Andy Tate, City of Austin Media Relations Manager, said.
There is no set amount or percentage for how much of the face value is paid on the City's General Obligation debt.
Budget documents show the city plans to pay $9.5 million in principal and nearly $2 million in interest on Nov. 1 for existing debt.
"As of September 2022, a total of $125 million in principal payments and more than $62 million in interest payments are due to be paid for the City's General Obligation debt for FY2023," Tate said.
Current debt rates (per $100 valuation):
The Texas Real Estate Research Center at Texas A&M University shows Austin’s September median housing price is $470,000.
Using the $470,000 median price as an example:
- City of Austin takes $450.
- Austin ISD takes another $531.
- Austin Community College grabs $63.
That’s more than $1,000 already going to pay the taxing entitles' debts.
Homeowners can get a homestead exemption for their primary residential property.
The Travis County FY 2023 Budget documents show Median Taxable Value Homestead is $305,183 for Travis County.
Using the $305,183 value:
- City of Austin gets $292.
- Austin ISD gets another $345.
- Austin Community College gets $41.
It's a total $678 for the median taxable value homestead to pay existing debt for those taxing entities.
"Voters authorized a portion of Revenue Bonds issued by the City in the past. However, the City does not immediately issue all of the debt that is authorized. Rather, the amount of debt issued each year depends upon the cash flow needs of the Capital Improvement Program, the City's debt issuance capacity, and bond market conditions," Austin's FY23 budget documents show.
The bottom line is voter-approved bonds give the government money to secure debt. It’s a promise from taxpayers to pay the loan with interest.
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