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May 11, 2018 • Local News

El Paso Inc: Projects, taxes, debt: Is it too much?

Amid rising concerns about El Paso’s debt and tax levels, City Council has approved a list of projects that will cost $94 million and add $80 million more to the city’s credit card.

Approved on a 5-3 vote at a special meeting last week, the projects include $64 million for improvements to the city’s 25 most-used roads, two $5.2-million conference centers, $3 million for neighborhood upgrades and $2.4 million for a visitor center at San Jacinto Plaza.

Robert Cortinas, the city’s chief financial officer, said sales of the bonds are expected to add just under five cents to the city’s property tax rate of 80 cents per $100 valuation over the next six years.

The new spending has sparked a debate on just how heavy El Paso’s tax burden is compared with other Texas cities. The answer depends on how you look at the numbers.

UTEP professor and historian Max Grossman criticizes the city over the debt it has taken on and the impact that bond payments have had on city taxes.

He cites figures from a new report published by Minnesota-based Lincoln Institute of Land Policy that compares property taxes nationally.

Tables in that report show El Paso has the nation’s second highest tax rate in the country.

And because of its taxes and debt levels, Grossman contends, the city could soon see its bond rating lowered, as recently happened to the city of Milwaukee.

Cortinas, the city’s CFO, concedes that El Paso’s tax rate is high. But the actual property tax burden – the amount of money each El Pasoan pays to the city’s coffers each year – is lower because property valuations for homes and businesses are among the lowest in the state.

In a presentation to City Council in March, Cortinas presented figures showing the overall city property tax burden is $398 per person a year – lowest of the six largest cities in Texas.

At the same time, the city’s 80-cent tax rate is the highest among those cities.

“It’s all about the tax base,” Cortinas said. “When you compare the city of El Paso’s tax base to any other large Texas city, we really are far behind.”

The market value of the average home in El Paso is about $141,000, but it’s well over $350,000 in Austin.

In addition, Austin and San Antonio have city owned electric companies, which pour tens of millions of dollars into the cities’ general fund annually.

Cortinas also took issue with the tax rate comparisons in the Lincoln report cited by Grossman.

Lincoln uses a $2.60 “homestead tax rate” for El Paso that Cortinas said isn’t an actual tax rate – and not the rate used in Texas – but a percentage of the average tax bill divided by a median home value.

In addition, he said, Lincoln’s tax rate comparisons aren’t based on El Paso’s 80-cent tax rate alone but on city, school district, community college, county and hospital district taxes – combined.

That, he said, is not fair or accurate.

Grossman said it doesn’t matter.

“That’s still what El Pasoans are paying, and according to Lincoln, it’s still the second highest rate in the country,” he said.

As for the Moody, Fitch or S&P bond houses lowering El Paso’s longstanding AA bond rating, Cortinas said, that’s not going to happen.

“We had our last bond rating in 2016, and we got very good comments from the raters,” he said. “They talked about our strong management, budget discipline and revenue forecast. We don’t have a problem.”

The projects approved on Monday by city representatives weren’t approved by voters, and that issue has council members and taxpayers divided. The city approved the addition of $80 million to its $1.5 billion dollar debt, according to Cortina.

City representatives Alexsandra Annello, Dr. Michiel Noe and Peter Svarzbein voted no on the package of projects.

“It was a hard vote,” Annello said later. “A few of these projects are in my district and are really important. But at the end of the day, I had an issue with using certificates of obligation.

“I think it’s wrong.”

According to various accounts, Dee Margo – now the city’s mayor – headed an ad hoc bond committee under Mayor Carlos Ramirez that changed the way El Paso financed big quality of life and major city infrastructure projects.

Traditionally, enhancement projects, like parks, went on bond ballots along with proposed city street improvements and competed for voter approval.

Margo’s committee proposed using voter approved government obligation bonds for quality of life projects and certificate of obligation bonds, which don’t require voter approval, for basic road, lighting and big maintenance jobs.

That policy stood until May 2017 when City Council approved changes recommended by the city manager and his staff to allow the sale of long-term certificates of obligation, or COs, to complete underfunded quality of life projects.

Now, COs can also be used if “the expected debt is the most cost efficient financing option available,” under the revised policy.

Margo didn’t address the change in the policy he authored, but said in an email interview that he now supports the issuance of COs because “many projects were not budgeted appropriately for the 2012 quality of life bond.”

“These projects need to be funded properly so the community gets facilities that they deserve and overwhelmingly passed when they voted on the quality of life bond,” he said in a written response. “The COs that were voted on were approved but will not be issued until 2019, and only if necessary.”

He added that most of the COs that council approved are for “safety concerns regarding street lighting and median improvements.”

Source: http://www.elpasoinc.com/news/local_news/projects-taxes-debt-is-it-too-much/article_9f453458-5167-11e8-8795-43139ef7f3f5.html