Turner after winning the election in 2015.
Turner after winning the election in 2015.
Photo by Michael Barajas

What Happens if Houstonians Vote Down the Millions in Bonds?

It would seem that everything in local politics as of late has, in one way or another, tied back to Harvey recovery and future flood prevention — and really, no one can blame flood victims who haven't thought about much else.

But there's a lot on the line for the City of Houston at the ballot box this election season, none of which has much to do with addressing floods (the ballots were set weeks before Harvey) but all of which could have serious financial impacts on the city and its various agencies depending on the outcome. Voters are being asked to approve nearly $1.5 billion in debt, including $495 million in improvement bonds to fund hundreds of city projects, such as upgrades to equipment and parks and various building repairs and emergency vehicle replacements, and $1 billion in pension obligation bonds to address the city's unfunded pension crisis.

For the casually civic-minded person who is bent on voting but who has not followed every twist and turn of the bond referendum debate, it could be a lot to weigh while standing in the little booth at the ballot, where descriptions of each of these items are written with the type of financial jargon that makes you recoil and squint your eyes. So let's debrief in plain English. Should the bonds fail, what are the consequences? And should they succeed, how do they affect the taxpayers?

The first key thing to note: The city is not proposing to raise taxes in order to pay off any of these bonds, and has devised a plan so that it can pay off the debt each year without needing to exceed the revenue cap, which limits how much the city can collect in property taxes. In all five propositions, there's a line at the bottom that says Houstonians are voting to authorize "the levying of taxes sufficient for the payment of the bonds," which Alan Bernstein, Mayor Turner's spokesman, described as boilerplate legal language. Asked whether, in the future, the city would decide to raise taxes if Houston for whatever reason was at risk of defaulting on payments (which is a key concern of at least some local conservatives), Bernstein said it was both unlikely to happen and too hypothetical of a scenario.

The first proposition, Proposition A, asks voters to approve $1 billion in pension obligation bonds as part of Turner's reform package, which amounts to basically a 30-year payment plan for the $8.2 billion of pension debt.

That $8.2 billion in debt is thanks largely to generous pension benefits owed to city employees and police that, 20 years later, have turned out to be more than the city budget can handle. Mayor Turner's pension reform plan — which was approved by the Texas Legislature this session — rolls back those benefits by $1.8 billion, divided between the police and municipal employees unions, reduces the interest rate on the payments and overall reduces the unfunded liability by $3 billion. The agreement came together after the unions agreed to take the benefits cut in order to help the city dig itself out of the giant hole and after bipartisan efforts at the state and local level got the pension bill through the Lege. There is no organized group protesting the bonds; high-profile conservative Republicans, including senators Joan Huffman and Paul Bettencourt and Lieutenant Governor Dan Patrick, support them. (The Harris County Republican Party doesn't explicitly oppose the bonds, but did vote not to support them.)

So here's what would happen if the deal were to fail at the ballot: The city employees and police would no longer have to agree to the $1.8 billion benefits rollback, leaving Houston still on the line for that money and leaving open the possibility of a much more immediate giant hole in the budget for the next fiscal year. Roughly a $150 million hole.

Ray Hunt, president of the Houston Police Officers Union, said it would be "catastrophic" if voters turned down the pension bonds. Layoffs and service cuts, he said, would be all but certain for Houston's first responders.

"You've gotta ask yourself: Why would a union leader, my case specifically, be supporting something that's costing him money?" he said. "If these fail, on April 1, I'm going to get a 10.5 percent raise and a 2.4 percent cost-of-living adjustment on my pension — and I'm still asking voters to vote yes and not give me that."

Bernstein said that layoffs could be a possibility up for discussion should Houstonians vote no, but said that at this point the mayor could not comment on specific financial measures the city would have to take should that happen. The impact on the budget would depend on negotiations with the municipal employees and the police union, Bernstein said.

"But in the overall picture," he added, "rejection of the bonds would likely make it extremely difficult, if not impossible, to fund some of the essential services and equipment purchases that are mentioned in each proposition, at least in the relative short term."

With that said, what are those essential services and purchases the city wants taxpayers to approve?

There are four different bond packages: $158 million would go toward police and fire department projects; $104 million for parks and rec upgrades; $109 million for general government-building improvements; and $123 million for library projects.

There is perhaps no one who has argued more convincingly before City Council about the need for the bond package money than Fire Chief Samuel Peña. The $158 million public safety bond package includes a key $54 million that the Houston Fire Department could put toward replacing its fleet, a fleet that Peña described as "eroding." Just over one-quarter of the fire engines and nearly half of the ambulances are at or over the replacement age, Peña said, which often leaves HFD relying on its also-eroding reserve fleet given that many of its trucks are prone to breaking down. Peña said that the money in the bond package would make it possible to kickstart a replacement plan for his fleet, which calls for about $10.9 million in funds every year to invest in 16 new ambulances, nine new fire engines and nine new trucks with ladders and towers attached.

"From my estimation, we are eroding as far as our skill set and we are eroding as far as our fleet," Peña told City Council a couple of weeks ago, also mentioning that his department lacks funding for additional training. "This is the point where we have to make a decision about what we want our fire department to do, and what we’re willing to fund."

The police department would be allocated $66 million in fleet replacements — Hunt said police lost 135 vehicles to Harvey and that the funds would be essential to help the department catch up.

Other examples of what's included: More than $100 million would go to three new community centers in Alief, Sunnyside and an undisclosed neighborhood in District G (which includes the Galleria and Memorial City). More miscellaneously, $1.3 million would go toward public pool upgrades, $9 million toward a new Solid Waste Department facility, and $16 million to library repairs. (See a full list of projects below.)

Early voting takes place from now until November 3, and voters can go to any polling location in the county to cast a ballot. You can find a full list of those here. Election Day is on November 7.

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