News Worthy Article from the Huntsville Observer Bob Sablatura
January 2, 2002
City debt skyrockets without voter approval
Huntsville city officials have voted to increase the city’s debt almost six-fold over the last three years to fund a long-term development plan that has never been placed before voters for approval.
City officials have also used a loophole in state law to avoid a bond election on its largest public project – a $12 million arterial road plan -despite a petition by taxpayers trying to force a vote on the issue.
The city’s general obligation debt has increased from $3.3 million in 1998 to almost $20 million today, and city officials are planning another $5 million bond issue in the near future.
Annual payments on the city’s outstanding debt have also soared, from $275,000 in 1998 to $1.4 million in 2001. City residents are funding the debt payments through sales tax and higher property taxes.
Huntsville mayor Bill Green says the bond issues were necessary to finance several much-needed projects, and elected officials were in a better position than voters to decide how the tax money should be spent.
“In a representative democracy, you elect people and hope they have the necessary information to reach those kinds of decisions,” Green says. “You are better off having elected officials do what they think is in the best interest of the taxpayers.”
Green says he is generally opposed to putting such issues on the ballot because the voters are usually not well informed on the issues, and voter turnout for bond elections is typically very low.
Also, the projects financed by the bond issues needed to be built, Green said, and the voters may have voted against the new debt.
“What happens if the voters say no, do we do what voters say and just ignore the problems,” Green says. “Given the circumstances, we couldn’t afford to take a chance by letting a small group of uninformed voters make that decision.”
Longtime Huntsville businessman Jim Standefer said Mayor Green is not giving enough credit to voters.
While bond elections usually do have a low voter turnout, Standefer says, the voters who come to the polls tend to be very informed on the issues.
“But they tend not to fall into lockstep with what that group at city hall wants to do,” he says.
That is the real reason city officials do not want to seek voter approval before borrowing millions of dollars for “marginal projects,” Standefer says.
There is a lot of apathy in the city, he says, but it is mainly because city officials purposefully release little information on projects they support.
“City officials shield themselves by refusing to release information on projects,” Standefer says. “And when you have such a closed system, it just creates more apathy.”
The city’s construction of the north-south arterial roads just west of I-45 is an example, he says. Even though most people were “for the most part opposed to it,” they didn’t have enough information to speak out against it. City officials took that silence for support for the project, Standefer says.
“They [city officials] think they can do whatever they want irregardless of what the people want,” Standefer says. “And if someone speaks up against them, they are branded a troublemaker or a cynic.”
The largest portion of the city’s new debt was issued to build a new major thoroughfare that runs parallel to I-45 just west of the freeway. The city borrowed more than $12 million to construct the new road – known as an arterial – in two stages.
The first portion starts at Highway 30 adjacent to West Hill Mall and extends to FM 1374, or Posssum Walk Road.
The second stage of construction will extend the arterial south to the Goree overpass on I-45 and is expected to be completed in late 2002. The project also includes several streets connecting the interstate highway with the new arterial. The new arterial road is named Veterans Memorial Parkway.
The city also borrowed $5 million last October to build Raven Nest Golf Course, a new public course situated between I-45 and Veterans Memorial Parkway. In addtion,city officials have announced plans to borrow an additional $5 million or more to build a conference center next to the golf course.
The city of Huntsville, and other government bodies, borrow money by issuing bonds, which are usually purchased by individuals and institutional investors such as retirement plan administrators and mutual fund managers. The bonds are essentially loan agreements with the city that call for the city to pay the money back with interest over a period of time, usually 20-30 years.
City officials are not required to seek voter approval before issuing bonds unless 5 percent of registered voters sign a petition forcing city officials to call an election on the issue.
The Development Plan
Huntsville city manager Bob Hart says the new arterial road, the golf course and the conference center are all part of a long-term development plan devised by the city to attract growth to the Huntsville area and increase the amount of value on the city’s tax rolls.
That requires a multi-faceted plan to make Huntsville attractive to companies looking to move or expand their operations.
Most of these companies, or their agents, have checklists when shopping for a new location, he says. Included on that list is whether a city has good roads, a public golf course and a conference center capable of handling business meetings and conferences.
“If an area does not have those things, it doesn’t even get considered,” Hart says.
The opportunity for the development plan was born as a result of the need for a new north-south road n the west side of I-45.
Mayor Green says he met with highway department officials a few years ago to discuss the expansion of the overpass at Highway 30 and I-45. The only way to make the expansion feasible, he says, was to make the feeders one-way streets.
Once the feeders became one-way, motorists on the west side of the freeway traveling north would have to cross over the freeway, travel north on the feeder and then cross back over the freeway.
“It didn’t make a lot of sense to put all that traffic on those overpasses,” Green says.
Building the west side arterial provided that alternate north-south route, and provided the city an opportunity to attract growth and economic activity in the area.
“I felt it was the right time to do it,” Green says. “For too long, the city has been ignoring the transportation needs of the city.”
The Call to Vote
The city’s plan to build the new thoroughfare ran into a roadblock, however, when residents of Elkins Lake became concerned about how many new entrances might be built into their subdivision, and where those entrances would be located.
Opponents of the arterial plan circulated a petition in the summer of 1998 to require an election before city officials could sell bonds to finance the project. Opponents successfully gathered enough signatures, primarily from Elkins Lake residents to force the issue on the ballot.
City officials then used a loophole in state law to get around the petition. Instead of placing the plan on the ballot as required by law, they split the project into two sections, called them separate projects and proceeded to sell bonds for the first half of the project without voter approval.
Elkins Lake resident Delora King, one of the organizers of the petition drive, says the city’s action was a blatant attempt to get around voters’ wishes.
“City council members had absolutely no wish to allow voters to have any say about it,” King says. “They figured out a way to get around the vote.”
At the city council meeting where the bonds were approved, a representative of Elkins Lake appeared and asked that council members honor the petition and call an election before borrowing more than $7.4 million for the project.
City council’s position was summed up at the meeting by the attorney representing the city in the bond sale, who told council members that since the scope of the project had been changed, it was a different project under the law and the city did not legally have to honor the petition.
City council members unanimously voted to go forward with the bond sale without an election.
The next year, an additional $5 million in bonds were sold to finance the remaining portion of the arterial project. Again, the vote was unanimous.
The city eventually proposed an entrance that was acceptable to Elkins Lake residents, and another petition drive did not materialize.
King, who herself served on city council during the late 70s and early 80s, says that despite what city officials claim, the arterial plan was unpopular with lots of residents, especially those on the east side of I-45.
“Most of the people living in the city have no interest in coming over to the west side of the freeway,” King says. Especially since most of the businesses are on the east side.”
King says city officials were concerned the voters would turn down the project.
“They did everything they could to keep this off the ballot,” King says. “They went around the taxpayers.”
Hart, who did not serve as city manager at the time, says the issue really boiled down to a practical matter –Elkins Lake residents started the petition because they were unhappy with one aspect of the arterial project. Once that was resolved, they dropped their opposition to the project, he says.
The Raven Nest
Hart’s first major project after taking over as city manager was to plan the construction of a new public golf course. The course was on Sam Houston State University’s wish list for years, but the state would not let them build it.
The city struck an agreement to build the course on land owned by the university. The city will operate the golf course and SHSU will get a portion of the proceeds.
City officials predict the course, slated to open in late 2002, will pay for itself with money collected in green fees and other revenues generated by the public course.
Late last year, the city sold $5 million in bonds to build the new course. City officials had the choice of securing the debt with revenue from the course, or securing the debt with taxpayers’ money.
Hart says the city decided to back the debt with a pledge of tax dollars because they were able to get a better interest rate on the bonds.
Voter approval was not sought on the project because planning on the new course moved rather quickly and university officials wanted “some certainty” that the course would be built before signing an agreement with the city, Hart says.
“An election would have delayed that process,” Hart says.
City officials also plan to borrow $5 million or more to build a new conference center next to the new golf course. A private developer has expressed interest in building a hotel next to the conference center.
Hart says the planning is long going, and he wants to make sure that the new facility will pay for itself before proceeding.
Although the city will finance the conference center with tax-supported bonds, those bonds will be paid off with revenues generated by the conference center, Hart says.
Mayor Green says the decision on whether to proceed with a bond issue for the conference center will fall upon city officials rather than voters.
Green says there are “not very many” projects that he believes should be approved by voters prior to being financed by tax-supported bonds.
“That’s the purpose of having elected representatives, to make the proper decisions,” Green says. “If they do not, then voters can elect someone else.”