By: Bill King
As of last year, Houston’s tax increment reinvest- ment zones (TIRZs) had just under $1 billion in combined liabilities. The lion’s share of these liabilities is slightly over $80 million in bonds secured by the TIRZs, pledging their future property tax receipts. The balance of the liabilities is a potpourri of obligations, running from trade account payables to agreements to reimburse developers for improvements they have constructed.
To put the $800 million of bonds issued by the TIRZs in some perspective, as of last year, the City of Houston only had about twice that amount ($1.723 billion) outstanding for all of its public improvement bonds. In other words, the TIRZs have issued a third of the total amount of bonds the City has borrowed for public infrastructure work.
Just three of the TIRZs (Uptown, Midtown, and Main Street) account for over half the TIRZ bond debt. The recent research from Baker Institute shows that the median income in these three TIRZs was at least 50% higher than the City’s median income.
The Uptown TIRZ alone accounts for 36% ($296 million) of the total bond debt. Included in that $296 million is $102 million issued by the Uptown TIRZ for affordable housing. According to its audit, City Council has, incredibly, already authorized the Uptown TIRZ to issue an additional $232 million in “affordable housing” bonds. It is important to understand that the TIRZs’ bonds are absolutely an obligation of the City of Houston and hence, its taxpayers. The only source of repayment of these bonds is future property tax receipts by the City, which will be transferred to the TIRZs so they can make the bond payments. Also, if any of the TIRZs are terminated, the City must assume their bond debt.
That means the TIRZs have tied up well over a billion dollars in future City property tax collections to service their bond debt. Those future property tax revenues will not be available to the City to pay for police, fire, garbage pickup, etc. It will take almost $400 million of future property tax receipts just to service the bond debt run up by the Uptown TIRZ.
The City Council approved all of this debt. If the City had issued these bonds directly, voter approval would have been required. This is because the legislature, in its infinite wisdom, decided that bonds issued by the TIRZs would not require voter approval, creating a loophole cities can drive a Mack truck through. Of course, City Council could ask for voter approval even though the statute does not require it. I am not going to hold my breath waiting for that to happen.
