Amid concerns over a proposed state law that could restrict municipal borrowing, officials in Buda are contemplating strategies to expedite bond issuance. House Bill 19, currently under review, aims to impose limits on the amount of debt Texas cities can assume. This development has prompted the Buda City Council to reassess its financial plans and infrastructure timelines. With significant voter-approved bonds earmarked for crucial projects, the city must now consider accelerating its bond sales to ensure uninterrupted progress.
On May 6, the council reviewed Buda's current debt portfolio, which includes funds from the 2021 general obligation bonds as well as planned capital improvement projects. These projects encompass essential initiatives such as drainage enhancements and downtown streetscaping. In late 2021, residents approved two bond propositions totaling nearly $90 million, designated for various upgrades across the city.
The fiscal landscape indicates that by year's end, Buda will carry approximately $138 million in tax-supported debt and an additional $60 million in utility-supported obligations. For the fiscal year spanning 2024-25, the city anticipates debt service payments reaching $13 million. Tax-supported debt is funded through property taxes, while utility debt relies on customer utility bills.
House Bill 19, introduced by several state representatives, proposes capping annual municipal debt payments at 20% of their average property tax revenue over the past three years. If enacted, this measure would drastically limit Buda’s borrowing capacity to roughly $27 million, significantly hindering the remaining $38.5 million in GO bonds approved in 2021. Such constraints could jeopardize numerous planned developments until the city's property tax base expands sufficiently.
With HB 19 slated to take effect on September 1, exemptions may apply to any debt issued prior to this date. However, without legislative action by mid-May, the bill risks being dismissed. Council member Matt Smith expressed hopes that the feared outcomes would not materialize, urging proactive opposition to the measure.
To circumvent potential restrictions imposed by HB 19, Buda must issue the remaining bonds before September. This necessitates a decision in June, followed by a sale in July, just ahead of setting the next fiscal year's tax rate. The City Council is scheduled to revisit this critical matter during their upcoming meeting on May 20.
If no immediate actions are taken, the proposed legislation could disrupt Buda's strategic financial planning and hinder its infrastructure advancements. Accelerating bond issuance appears to be a prudent step to safeguard the city's developmental trajectory amidst legislative uncertainties.
