Urban Literacy: What is a Municipal Bond?

Print Share on LinkedIn Comments More

Work crews prep part of East Commerce Street near East Houston Street for a one-year project funded by the 2012 Municipal Bond that will necessitate the nine-month closure of that part of the road. Bridge reconstruction and sidewalks are in the works. Photo by Edmond Ortiz

Do you understand the municipal bond process, how it works, or why it matters? If not, that is okay, but preparations for the 2017-2022 municipal bond are already well under way, despite what some folks at the City of San Antonio will tell you. Truthfully, the debate over which projects do or do not make the list is highly political, and as soon as one bond is approved discussions about the next bond begin. So, can an average citizen have meaningful input on this important process that shapes our city? The answer is yes, and it’s not so difficult. Anyone can prioritize how the city spends tax dollars right now by taking the 2017-2022 Municipal Bond Survey. The results of this survey will be shared publicly with community leaders, residents, and city officials alike.

A municipal bond is a financial tool that cities use to implement large improvement projects. Think new highways, bridges, water infrastructure, etc. According to Mike Etienne, director of the City’s East Point and Real Estate Services, more than half of the $596 million 2012-2017 bond went towards streets and drainage. That seems surprising given the incredible lack of environments that accommodate anything besides cars, but not when one considers how rapidly San Antonio is sprawling towards and beyond loop 1604. Providing infrastructure 20 miles from downtown is financially unsustainable, and it means that less money remains for our urban core. But enough from the soapbox – back to those bonds.

The City’s Transportation & Capital Improvements (TCI) Department maintains much of our city through two programs: the Infrastructure Maintenance Program (IMP) and the municipal bond program.

The IMP is intended for small to medium scale maintenance work on physical infrastructure – resurfacing roads, fixing sidewalks, or patching up flood infrastructure, for example. According to Razi Hosseini, assistant director of TCI, IMP projects top out at about $1 million. Any project requiring more than that is typically handled through the bond program. The budget for IMP is updated annually and considers the resource needs of the program on a five year rolling basis. This flexibility is built into the program to allow the city to respond to maintenance needs as they arise. Speaking of which, ahem, I can name at least one puddle in my neighborhood that could use some attention from the good old IMP.

Dignowity Hill residents try to make the best of the pool on Lamar. photo by Scott Ball

Dignowity Hill “swimming pool” on Lamar Street. Photo by Scott Ball

The municipal bond program differs from its counterpart in a few important ways. First, it is relatively inflexible compared to IMP. San Antonio’s municipal bonds run on a five year cycle, the next of which goes from 2017-2022. (Seriously, vote now.) At the beginning of that five year period, and even before it starts – i.e. now, hint, hint – negotiations occur in more and less transparent ways. Everyone with an agenda lobbies for the projects they want to happen, and deals are made. By no means am I implying corruption is involved, but let’s be honest: this is politics. People in positions of power do have more opportunity to shape that list than regular folks.

As the City’s CEO and head of City staff – that’s about 9,000 civilians and almost 4,000 uniformed personnel – City Manager Sheryl Scully will undoubtedly have the strongest voice when it comes to which projects make it into the bond. In many ways she deserves that decision making power – the AAA credit rating that San Antonio enjoys is largely a result of her prudent fiscal leadership. That rating ensures that our bonding capacity, our ability to service debt, will be as high as possible.

Anecdotally we have heard predictions that this year’s bond will be somewhere around $750 million, a substantial increase from 2012’s $596 million and 2007’s $550 million. With that said, it is far too early to know an official amount for the upcoming bond, and much negotiation remains. As those negotiations unfold, transparency on the part of decision makers like the City Manager will be vital to making this bond program an equitable one.

Once an agreement on the official list is reached, the bond goes up for public vote through a series of ballot items called bond measures. Bond measures are divided up on the ballot into propositions for individual approval, and those propositions correspond to the different funding categories within the bond. In San Antonio, the five funding categories in the last municipal bond broke down as follows:

For each funding category, the city forms a Community Bond Committee comprised of citizens acting in an advisory role to City Council. Those committees make their formal recommendations in the form of a bond report like this one from the 2012-2017 cycle. After the bond is approved the project list does not change. Any project savings that are realized during the bond program are reserved for use towards public improvements at the discretion of City Council. All the long winded discussion preceding a bond measure at least partially explains why voters tend to approve them – nobody wants that experience twice.

Image courtesy of the City's Transportation and Capital Improvements Department. Click here to download full size image.

Image courtesy of the City’s Transportation and Capital Improvements Department. Click here to download full size image. 

If all this bond talk sounds complicated, that’s because it is. City making is a messy affair, and municipal bureaucracy can numb the mind of even the most patiently engaged citizen. There is plenty of nuance to the bond process not covered in this article, and the diagram to the right attests to that fact. For those interested, more information is available in the resource section at the end of the article. For those uninterested – that’s okay, too – not everyone has to be an expert on urban mechanics. But everyone should participate if the barrier to entry is low, which is exactly why we ask readers to take the 2017-2022 Municipal Bond Survey. It only takes five minutes – fill it out, be heard, and then go back to drinking, working, and whatever else floats your boat.

Hungry for more? Don’t worry, we’ve got you covered.

Check out these additional resources related to municipal bonds:

*Top image: Work crews prep part of East Commerce Street near East Houston Street in May 2015 for a one-year, $11 million project as part of the 2012 bond issue. Photo by Edmond Ortiz.

Related Stories:

San Antonio Credit Rating: AAA for Sixth Straight Year

Bexar County Receives AAA Bond Rating

City Council Approves $2.5 Billion City Budget

It’s Official: State Commission Approves El Mercado Zona Cultural

 City Council Ponders $5.6M in Capital Projects

5 thoughts on “Urban Literacy: What is a Municipal Bond?

  1. Nicolas–thanks for helping to educate those of us (myself included) who really want to be more involved in our city, but don’t know where to start!! Keep these pieces coming! Thanks again!

  2. We keep hurting ourselves on city bonds by keeping them unrealistically LOW. The 7th largest city in the nation does a bond every 5 years that is smaller than the bonds done our 3 largest school districts (NISD, NEISD and SAISD) every 3 years.

    We keep calling them “large” bonds, when they wouldn’t even be large for a school district. Our city bonds are TINY for a city our size. Our council members want to be able to sell us a “painless” bond, but this community has ALWAYS invested in itself, when the investment is transparent and worthwhile.

    If we bite the bullet one time, with an appropriately sized bond, from that time forward the future bonds will be “painless,” i.e. no tax increases.

Leave a Reply

Your email address will not be published. Required fields are marked *