Frequently Asked Questions - Q21


Question:

Texas law and Houston city ordinances require that airport system revenue bonded debt can only be serviced from airport net revenues (operating revenues less operating expenses). Won’t this proposed City charter amendment hamper or prevent the City from maintaining sufficiently high airport rates? Won’t the proposed amendment therefore create difficulties in selling City airport revenue bonds and cause bond ratings to drop on airport revenue bonds already outstanding?

Answer:

No. In addition to stating that the revenue bonds can be serviced out of only airport net revenues, Texas law and City ordinances also mandate that the City will maintain net revenues sufficient to service any bonds outstanding. Therefore, even with the proposed charter amendment, the City has no choice but to raise airport rates sufficient to service unpaid airport revenue bonds. Thus the bond rating agencies, as well as both existing and future bondholders, should have no concerns as to whether the airport revenue bonds will be paid when due. What the proposed charter amendment will do is make certain that the City will have to decrease property tax and/or other charge rates to compensate for required increases in airport rates, if the required increases in airport rates would cause the City to exceed the overall revenue cap. Either that or go to the voters for approval for an increase in the overall cap, or cut some of the very apparent fat that now exists in the City budget. Fact is, the bond rating agencies, as well as both existing and future airport revenue bondholders, should welcome the financial discipline fostered by this charter amendment, in that it will help better control operating expenses and thus better assure net revenues left over for debt service.



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