Debt Obligations

In reviewing the City's debt obligations, it may be helpful to define some terminology related to municipal debt:

• Authorized But Unissued Debt: Tax-supported debt that has been approved by the voters but not yet issued.

• Capital Appreciation Bonds (CABs): A debt instrument governments can use to fund buildings, parks, roads, and other capital projects. CABs require no payments of any kind until maturity, at which time the full amount of the principal and all interest accrued must be repaid to the investor as a single lump sum. The bond period may be years or even decades. The assumption is that, by the time the bond matures, a government’s tax base will have expanded enough to allow it to pay the lump sum of principal and interest.

• Certificates of Obligation (COs): Debt instruments issued without voter approval (unless a referendum is petitioned) that are backed by tax revenues, fee revenues, or a combination of the two. They are a financing mechanism a city may use to pay a contractual obligation incurred in (1) a construction contract; (2) the purchase of materials, supplies, equipment, machinery, buildings, land, and rights-of-way for authorized needs and purposes; or (3) the payment of professional services, including services provided by tax appraisers, engineers, architects, attorneys, map makers, auditors, financial advisors, and fiscal agents.

• Debt: Term used to refer to public securities issued or outstanding public securities. It does not include other long-term liabilities, such as public pension funding obligations, or other liabilities that are not reported to the Bond Review Board. This term includes both revenue-supported debt and tax-supported debt.

• Debt Issued: The total principal amount of debt sold. The amount of debt issued depends on the will of the voters (in the case of most tax-supported debt), action of the governing body, market conditions, and budgetary needs.

• Debt Outstanding: The principal owed over the remaining life of all debt issues.

• Debt Service: The annual combined principal and interest amount needed to repay all debt on time and in full.

• Direct Debt: The total amount of a municipality’s debt that has been issued by the municipality for its own benefit and for which the municipality is responsible to repay. (See also Overlapping Debt.)

• General Obligation (GO) Bonds/Debt: Debt instruments that are secured by a pledge of the full faith and credit and the taxing power of the issuer. The term is synonymous with the term “tax-supported debt.”

• Lease-purchase: Financing the purchase of an asset over time through lease payments that include principal and interest. Lease-purchases can be financed through a private vendor.

• Overlapping Debt: Debt of another government or governments that at least some of the reporting government's taxpayers will also have to pay in whole or in part. (See also Direct Debt.)

• Revenue Bonds: Special obligations of the issuer (as opposed to general obligation bonds) that are payable solely from the revenues derived from an income-producing facility. Revenue bonds are sometimes further secured by a first mortgage on the physical plant or property whose revenues are pledged. Such bonds are called “first mortgage revenue bonds.”

• Revenue-supported Debt: Debt secured by non-property tax revenue, such as sales tax, tuition, admissions to athletic events, tolls, or water, gas, or electric municipal utility charges. It does not include debt that is also payable from property taxes. Revenue-supported debt generally does not require voter approval.

• Tax-supported Debt: Debt backed by a pledge of property taxes levied within the issuer’s boundaries. Some tax-supported debt may be secured by a combination of property taxes and other revenue sources. It generally must be voter-approved (with exceptions for COs, tax notes, and contractual obligations for personal property).

• Tax Notes: Also called “anticipation notes.” A debt instrument that a city may sell to finance the construction of public works, the purchase of supplies, land, and rights-of-way for public works, to pay for professional services, to pay operating expenses, or to pay off cash flow deficits. Tax notes used to pay for public works or professional services must mature before the seventh anniversary after the notes are approved by the attorney general. Tax notes used to pay operating expenses or to fund a city’s cumulative cash flow deficit must mature before the first anniversary after the notes are approved by the attorney general.

• Tax Rate: The rate at which taxes are levied per $100 of assessed valuation. In Texas, the property (or “ad valorem“) tax rate for local governments is expressed in terms of dollars or cents per $100 of assessed valuation. The Interest and Sinking (I&S) Fund portion of the property tax rate is levied by a city on real and personal properties located within its jurisdiction to pay for general obligation debt.

• Debt Information Excerpt from Fiscal Year 2021 Adopted Budget
• Debt Information Excerpt from Fiscal Year 2020 Adopted Budget
• Debt Information Excerpt from Fiscal Year 2019 Adopted Budget
• Debt Information Excerpt from Fiscal Year 2018 Adopted Budget
• Debt Information Excerpt from Fiscal Year 2017 Adopted Budget