Texas is often considered the state that got it right when it comes to taxation, individual liberties, and economic freedom; but while this is generally true of our state government, it is not always the case with our local governments. Take the city of El Paso, for example.
Last November the border city approved financing for over 60 different projects including parks and recreation, a zoo, libraries, museums, and a much coveted 9,000 seat baseball stadium for the Triple-A Tucson Padres. The total cost of these urban ventures: $473 million dollars.
This is a lot of debt to assume for a city of 673,000. Some argue the new projects are well deserved; but with the addition of the recent $473 million bond package, El Paso’s total local debt outstanding increased to a whopping $2.1 billion. As if that wasn’t enough, Detroit’s recent bankruptcy filing has had a costly impact on the municipal bond market.
When Detroit filed for Chapter 9 bankruptcy earlier this year, the move created a lot of uncertainty in the muni market, leading investors to demand a better yield for their investments. In turn, cities, like El Paso, were forced to raise their interest rate offerings to entice investors, ultimately costing taxpayers more to issue debt. Subsequently, El Paso took on an additional $17 million in debt to enter the market. The bad timing will put the city further in the hole.
Since taxpayers ultimately fund the city’s ventures, the residents of El Paso may see higher taxes and fees to cover the additional costs or could see a reduction in services. Either way, it’s likely to be bad news for local residents. Instances like this are happening all throughout the state as cities, counties, and school districts continue their ominous debt binge. If Texas is to remain prosperous over the long-term, this is an issue that must be contended with.