Pearland’s bond refinance and re-structure debate: who said what

A standing-room-only crowd greeted Mayor Tom Reid and the City Council Monday (July 14). Many among those gathered came to speak and offer their opinion related to a proposed bond refinance and restructuring.

The Journal was there to take pictures and listen as council members debated for more than two hours. Opinions were divided and strong arguments were made from both sides. Here are some pictures and a sampling of the comments made before the measure was ultimately defeated by a narrow three-to-two vote.

Carol Artz Bucek, President and CEO of the Pearland Chamber of Commerce was among the citizens who spoke prior to the council’s debate.

The issue was brought to the chamber’s community leadership organization and the governmental affairs committee by City Manager Clay Pearson, Artz Bucek said.

“It was explained to us about the tax increase and most of our businesses do agree we should save money and we should pay off debt. The concern is what will happen when that debt is paid off; will the tax rate go down? I think those are questions that need to be answered to ensure our businesses that are already here stay here, that they continue to grow and provide jobs for the Pearland community,” she said.

During citizen comments, one argument made by Quintin Wilkes was tax increases related to the $118 million bond election approved by voters in 2007 were unfair because there were many people who had moved to the city since that time. He also questioned why the proposal was put on the agenda as an “emergency” measure when first presented at the June 23 city council meeting, which meant no second reading would be required.

“As a resident, I am a bit confused by the emergency status. What made this an emergency and why that was called? Why were (councilmembers ask to make) such a quick decision?” Wilkes asked. “Something else that concerns me is there is a lot of reference to the 2007 bond election.

“As I walk down my street I can assure you the turnover since 2007 is dramatic. So to say citizens approved this, everyone knows what happened to the entire landscape of our entire economy since 2007. So, to base your decisions on that is very disturbing to me. I don’t think it’s fair,” he said.

The original proposal passed by a narrow three to two vote at the first of two readings Monday (June 23) and would refinance existing bonds of roughly $69.4 million or 23.5 percent of the city’s total debt of approximately $295 million in addition to a portion of unissued bonds from the 2007 bond package at a lower rate. City officials advised going from a 25-year-term to a 20 year-term which would create a saving of roughly $8.3 million over time and would free up the council’s ability to issue additional debt in the future, officials said.

After citizen comments, City Manager Clay Pearson led off the discussion and went over the basic question before the council.

“There are pros and cons, and we know that there is no exact, right answer, but the part of the question is whether the city wants to restructure part of the debt, and in addition to paying lower interest rates do we want to pay off the bonds sooner?” he said.

Councilmember Scott Sherman addressed the argument that raising the tax rate to pay for voter-approved projects from the 2007 election was unfair.

“How many years is it when the statute of limitations runs out on what voters wanted? Do we wait two years and say ‘No, we don’t need to follow that,’? Is it three years? Where is the line?” he asked.

The council had an obligation to issue voter-approved bonds, Sherman said.

“What is the point of having an election if you’re not going to follow what the voters want? The election in 2007 gave us the authority to fund 2007 projects and part of that is the rates we are looking at tonight. If we are going to be able to continue in the future to build the things voters want, we owe them the obligation and the duty at this day to lessen their burden in the future,” he said.

If the projects weren’t funded, Sherman argued future bond elections could fail and bonds would be needed for the city’s needs as it grows.

“The voters may not approve a single bond after this; at this point I know I wouldn’t approve an election. If I’m not going to get something for seven or eight years why would I vote for it?

“If we are going to live in a magical world where we are not going to build a single road in this town, we are not going to build another building, another park, then fine, leave the tax rate where it is. But that is not what is going to happen. The city is going to continue to grow and there are going to be wants and needs.”

Earlier in the meeting, financial advisors John Robuck and Ryan O’Hara of BOSC Inc. went over a PowerPoint presentation that outlined the various options for the refinancing bonds. Option B (not included in the agenda documents) would offer a savings of roughly $1.6 million over 20 years, or approximately $150,000 each year, Robuck said.

Councilmember Tony Carbone asked Robuck about the fees involved with the sale of the bonds.

“Can you explain the underwriter’s discount?” Carbone asked.

“When we do a negotiated sale and we go out and have underwriters to sell the bonds in advance we have to pay those bond salesmen a fee. It’s based on a dollar price per bond,” Robuck said. “I think in this case it’s roughly $137,000 in fees, which includes the council that represents them.”

“So, I’m looking at $270,000 in fees?” Carbone asked.

“That’s right,” Robuck answered.

Carbone also went on to question the specifics of the tax rate increase and if voters were given accurate information about how much the rate would be increased.

Councilmember Keith Ordeneaux voice staunch support for the bond refinance and re-structure. He also addressed the argument that the proposed tax rate increase was unfair to west Pearland voters, already facing a tax rate increase from the recently-approved Alvin ISD bond election.

“I think the taxpayers in Shadow Creek Ranch want new facilities. They’ve asked for them. They’ve agreed to pay for them. They just passed a very large school bond issue and were very instrumental in passing that bond for Alvin ISD,” Ordeneaux said. “Along those lines, the comment has been made that Shadow Creek Ranch residents are going to bear a larger burden; that is correct because of the bond they just passed.”

Ordeneaux said that Pearland ISD tax rate is higher compared to Alvin ISD.

“Pearland ISD tax payers have been paying a higher tax rate than Alvin ISD, and that is most of the city. The reason for that is growth and what is needed for that growth,” he said.

As PISD’s growth slows, Ordeneaux said the rates would even out.

“You will see that (PISD’s) tax rate come down. In my opinion what this re-structuring would do is to help pay down our tax rate,” he said.

Ordeneaux voiced his frustration toward the end of the discussion.

“My take is we need to do it today. We re-structure the debt and start paying it off. If we don’t restructure we’re going to end up stacking this current debt tax rate onto new debt service tax rates,” he said.

“Are there three of us here that want to raise taxes at all to pay off debt? Or are we just going to keep doing what we’re doing? That’s the question. (Otherwise) we’ll keep the tax rate as it is and I will make a calendar appointment to meet ya’ll here in 30 years when we’ve stacked debt payments on top of debts payments and my kids don’t want to move back.”

Although the debate grew heated at times, Councilmember Greg Hill said he thought the council’s focus on a conservative approach was a positive thing.

“One thing that’s good in my opinion is you’ve got a council here that is arguing over two conservative principles. I think that’s reassuring and that’s what makes this issue complicated.

“On one hand you think to yourself it makes sense to pay off debt; that’s fiscally conservative. On the other hand it makes sense not to raise taxes; that’s conservative. So, I think the approaches are good.

In the end, Councilmember Greg Hill cast the deciding vote and the measure was defeated by a three-to-two vote.

“I don’t think that voting against the restructure is kicking the can down the road because I think we can take an incremental approach by moving from a 25-year-term to a 20 year-term. (We can) still pay down debt and attack debt aggressively and not burden the tax payer with a seven cent (tax rate) increase ultimately, or greater.”