Frequently Asked Questions - Q14


Question:

Won’t all of this forcing of the City to blend citywide debt service into an overall financial discipline formula make bondholders and the bond rating agencies nervous? Remember, back during “Tax Vote ‘97” two bond rating agencies threatened to downgrade the City’s bond ratings if Tax Vote ‘97 passed.

Answer:

SUBSECTION THREE of this charter amendment makes it very plain that the City will always honor its covenants with bondholders by giving them “first dollar”, through reducing operating expenditures, if necessary. Further, history does not support the anxiety expressed by the bond rating agencies during the Tax Vote ’97 debates. The City’s bond ratings did not suffer when voters amended the city charter in the early 1980s to place a cap on the property tax rate allocated to operations. Neither did the State of Texas’ bond ratings decline after Texans overwhelmingly (84%) approved capping a portion of the State’s appropriations in 1978. According to a comprehensive independent research study (copy available upon request), numerous cities in the country and about half of the states have put in place some sort of cap on at least some portion of their revenues or expenditures, without suffering any related decline in bond rating. The extremely few cases of reduced bond ratings cited to defeat the 1997 tax limitation measure were distortions of the truth, to put it mildly. Unfortunately, Tax Vote ’97 was too under funded to sufficiently refute the distorted charges through the media. We believe that this time, before making unsubstantiated statements, the highly skilled and ethical professionals at the municipal bond rating agencies will take the time to check their very own records and note that, in the vast majority of cases, rating agencies have not downgraded the bond ratings for the many cities or the approximately one-half of the 50 states as a result of those governmental entities having instituted some form of cap on their revenues or expenditures.



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