Local governments today are utilizing certificates of obligation (COs) to a much greater extent than in the past. As a result, taxes and debt are growing without voter approval and Texans are being denied the right to decide.
For those unfamiliar with the CO concept, these nonvoter-approved debt instruments provide a way for cities, counties, and some special districts to borrow money and obligate property taxpayers for broad purposes, including “to fund the construction, demolition or restoration of structures; purchase materials, supplies, equipment, machinery, buildings, land and rights of way; and pay for related professional services.” While some argue that COs provide funding flexibility needed for certain situations—i.e. the need to repair roads after a natural disaster without having to hold an election—there are numerous examples of abuse which raise serious questions over their discretionary use (see here, here, and here, for example).
In this loose local environment, CO debt has spiked considerably over the last decade. According to the Bond Review Board’s (BRB’s) latest annual local government report: “Since fiscal year 2016, CO debt outstanding has increased by 132.9 percent ($17.61 billion) from $13.24 billion outstanding in fiscal year 2016 to $30.85 billion in fiscal year 2025.” What makes this trend especially interesting is that CO debt experienced a significant uptick post-2020, despite Texas local governments being inundated with federal pandemic aid.
The most prolific issuers of CO debt were city governments. “Cities accounted for 80.5 percent of the total CO debt outstanding at fiscal year-end 2025.”
What the data indicates is that CO debt is on the rise, and there are plenty of indications that their use is not always for mission critical purposes. As a result, Texans are paying higher property taxes for many things that ought to have been decided by voters.
It’s long past time that the Texas Legislature reined in these abuses and give back decision-making rights to Texas voters.
