Texas expects debt issuance to increase this fiscal year

Texas plans to issue about $ 5.17 billion in debt in fiscal 2021, an increase of $ 491.2 million or 10.5% from the previous year’s amount, according to the Texas Bond Review Board. Annual Report.

The annual report published each December lists the public and local debt during the fiscal year ended August 31 and projects the expected amount for the current fiscal year.

This year’s report comes as Texas lawmakers prepare to meet in January for their 87th session. Lawmakers face lower than expected incomes after the double whammy of the COVID-19 pandemic and falling oil prices.

In FY2020, the government’s outstanding debt increased 4.2% to $ 62.44 billion, compared to $ 59.90 billion in FY2019 and $ 56.83 billion for fiscal year 2018, according to the BRB report.

“Bonds issued by agencies, colleges, and universities in the State of Texas in fiscal 2020 rose 88.3% to an aggregate total of $ 12.40 billion, from $ 6.59 billion. dollars issued in fiscal 2019, ”the report said. “Fiscal 2020 issuance included $ 3.02 billion in new money and $ 9.38 billion in repayment obligations. Other debt issued included $ 1.29 billion of commercial paper.

About $ 18 billion or 29% of the $ 62.44 billion in total government debt was backed by the government general obligation commitment, a decrease of $ 132.9 million or 0, 7% of the $ 18.14 billion backing GO’s commitment at the end of fiscal 2019.

Excluding conduit and component debt, $ 35.11 billion or 56% of total government debt was backed by non-GO revenue pledges, an increase of $ 1.73 billion. dollars or 5.2% of the $ 33.38 billion in circulation in 2019. Colleges and universities are the biggest sources of revenue. debt with an outstanding amount of $ 15.86 billion, excluding the debt of the Permanent University Fund.

About $ 9.33 billion or 15% of outstanding issues at the end of August were government debt, including $ 4.56 billion in debt to Grand Parkway Transportation Corp., a partnership public-private with the Texas Transportation Commission building a toll highway. around the greater Houston area.

Conduit and component debt outstanding represents an increase of $ 937.9 million or 11% from the $ 8.39 billion outstanding at the end of fiscal 2019.

Texas entered the fiscal year on September 1 with $ 17.49 billion in authorized but unissued debt, up from $ 13.35 billion at the start of fiscal 2019.

The increase comes from $ 3 billion for cancer research and $ 200 million for TWDB projects in economically troubled areas, both authorized by voters in the November 2019 general election, as well as from $ 200 million for Texas Water Development Board State participating account projects, $ 208.8 million for health. and the Social Services Commission deferred maintenance projects, and $ 326 million for a TXDOT Austin campus consolidation project, all authorized by the 86th Legislature.

Texas ranked 42nd among all states for tax-financed net debt per capita. Texas had $ 379 in net tax debt per capita compared to the national median of $ 1,071, according to Moody’s Investors Service.

The most recent data from the US Census Bureau showed that Texas continued to rank second in terms of population, second among the 10 most populous states in terms of local debt per capita, and fourth in total state debt. and local per capita and seventh for the state debt per capita. .

Texas’ per capita net tax debt was second to that of the other eight AAA-rated states. Delaware had the highest per capita debt among the triple A states at $ 3,289. Texas’ personal per capita income in 2019 of $ 52,813 was higher than that of five other AAA states: Florida, Georgia, North Carolina, Tennessee, and Utah.

“Many communities across Texas continue to experience significant population growth with increasing demand for infrastructure, programs and services,” the report notes. “The state’s population growth, according to the US Census Bureau, increased 5.6% or 1.5 million from 2015 to 2019, forcing many small and medium-sized communities to increase funding for infrastructure such as roads, schools, water and sanitation services to meet expanded needs.

Texas local governments ended the last fiscal year with $ 239.98 billion in assets, an increase of $ 37.63 billion or 18.6% from fiscal 2015, according to the report.

Of the 2019 total, 65.7% or $ 157.59 billion is GO debts to be repaid through the collection of local property taxes, while the 34.3% or $ 82.39 billion remaining will be reimbursed from revenues generated by various projects such as water, sewer and electric utility charges.

Since fiscal 2015, the stock of tax-financed debt has increased by 21% or $ 27.33 billion, and the stock of tax debt has increased by 14.3% or $ 10.3 billion. of dollars. School districts accounted for 36.6% of outstanding local debt and cities 32.4%. Water districts occupied the third highest percentage at 13.9%.

The remaining 17% was held by community and junior colleges, counties, health districts / hospitals and other special districts.

Tax-financed local debt increased 21%, from $ 130.26 billion in fiscal 2015 to $ 157.59 billion in fiscal 2019, according to the report. Tax-funded debt for Texas school districts has grown over the past five years, from $ 71.96 billion in fiscal 2015 to $ 87.67 billion in fiscal year 2019, or nearly 22%, while public school attendance for districts with unpaid debt rose 6.9% to 5.03 million students. .

“School district tax-financed debt accounted for 55.6% of all tax-financed debt and is primarily used to fund educational facilities, while only a handful of school districts have tax debt for the construction, improvement and equipping of sports / stadium facilities ”, the report noted.

Excluding private placement conduits and debt issuances, in fiscal 2020, the weighted average issuance costs for government bond issuers was $ 5.09 per $ 1,000, compared to $ 5.54 for $ 1,000 for fiscal 2019. Issue sizes ranged from $ 23.0 million to $ 1.27 billion. .

The average issue size of Texas state issuers increased to $ 343 million from $ 198.3 million in fiscal 2019, resulting in lower costs per $ 1,000 tranche nominal value.

Of the 25 state transactions completed in fiscal year, 20 were for $ 100 million or more, compared to 17 of 29 transactions completed in fiscal 2019.

In fiscal 2020, the weighted average subscription spread represented 73.5% of all issue costs.

“Due to an increase in withdrawal costs, spread fees and management fees for the average underwriter during fiscal 2020, the weighted average underwriting spread per $ 1,000 of bonds issued increased from 3 , $ 75 to $ 3.70 in fiscal 2019, ”the report notes.

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