Alfaro confirmed the increased bond capacity, which was originally estimated to be $205 million, to Community Impact Newspaper on Thursday. So why can the city seek more bond money? Alfaro explains: The city’s growth outpaced predictions—resulting in more money collected from property taxes—and interest rates stayed under predictions—allowing the city to borrow money at a cheaper rate than expected. The extra money allowed the city to pay off principle on its outstanding bond debt earlier and clear up more borrowing credit sooner.
Sumit DasGupta, Mayor Steve Adler’s appointee to the Bond Oversight Commission and the Bond Advisory Task Force, said this news was unexpected.
“It’s a surprise to all of us, it’s good news, the kind of surprise you want,” DasGupta said. “Before we were saying we wouldn’t have this extra capacity for 2018 and beyond, but now that we have this money it’s fantastic. It gives you certain feeling that you can do more.”
“It’s a surprise to all of us, it’s good news, the kind of surprise you want.”
— Sumit DasGupta, Bond Oversight Commission member
The news comes just weeks before Austin City Council will begin hearing project proposals for the 2018 bond—potentially starting in June. Last year, council members discussed the possibility of a bond for light rail transit in the near future. Projects around flood mitigation, parks and battling homelessness have also been kicked around since.
This does not imply the city will have $500 million to spend for next year, but rather that is how much the city will be able to spend without impacting taxes over the next eight years, which is the life of a bond cycle in Austin.
Last year, taxpayers approved the $720 million mobility bond—the largest in Austin’s history—and a 2-cent tax rate increase in exchange.
According to Alfaro, the city also had a $500 million no-tax impact bond capacity in 2016. But after calculating that a 2-cent tax increase would increase the capacity by $425 million, the city decided against going for a $925 million bond package, and instead earmarked $205 million of that no-tax impact capacity for the 2018 bond.
Although Alfaro called the amount “pretty solid,” he said there were a number of things that had to happen in order to maintain that number:
- The city would have to stay committed to the two-cent tax increase laid out in the 2016 Mobility Bond. A half-cent, in 2018, a half-cent in 2019, and a full cent in 2020.
- Austin’s total assessed property value will need to continue its growth according to predictions, which Alfaro said are always “conservative” to avoid risk. He said the city’s population growth has played a major role in the growth of the assessed value.
- Interest rate growth will need to stay under predictions. Alfaro said while interest rates have stayed steady at around three percent, the city plans for an increase to five percent each year to play it safe.
