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GO Bond Election | General

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1. What is a General Obligation Bond?

General obligation bonds are debt instruments issued by states and city governments to finance large capital improvements. Bonds are sold to investors and the proceeds from the sales of these bonds are used to pay for major capital investments that have a public purpose—such as the flood protection, mobility and public safety projects contained in the Sugar Land Bond Program.  Bond elections provide voters the opportunity to have a say in which projects they are most willing to support through the approval of bond propositions to authorize funding for each type of project on the ballot.

2. What projects are planned to be built if the bonds are approved?

• Proposed Drainage Projects
• Proposed Public Safety/Public Facility Projects
• Proposed Streets Projects
• Proposed Animal Shelter Project

3. How do these projects affect me?

Many of the projects build on past and future efforts.

• drainage improvements
• improved streets and mobility
• a public safety training center for first-responders
• a new animal shelter
• investments in aging infrastructure, including streets
• fire equipment to protect the public
• an expanded emergency operations and public safety dispatch center

4. Why is it important that I vote in this bond election?

 Because of low voter turnout, local elections are typically decided by a small number of people. Voting on this bond election gives you the opportunity to have a say in the future of the city.

5. Does the City Council support this new bond election?

Sugar Land City Council unanimously voted to call a Nov. 5 bond election during its Aug. 14 meeting to provide voters an opportunity to decide whether to fund projects identified by residents to address drainage, public safety, mobility and an animal shelter.

6. Why weren’t we given an opportunity to decide which projects to put on the ballot? Last time, a citizen committee made a recommendation; so how were these projects selected?

Based on citizen satisfaction surveys, extensive planning through various master plans and City Council input, drainage, public safety, and traffic and mobility are the top three priorities for our residents. Projects identified for the GO Bond were based on these driving factors. Drainage projects were identified by previous drainage studies, from structural flooding to major thoroughfare ponding to neighborhood street ponding; as well as project readiness. Public safety and public facilities were identified based on Facility Master Plan recommendations. Streets and mobility projects were selected based on pavement assessments and traffic studies. The majority of the projects have been presented to City Council in the past through studies, preliminary engineering and/or design phases.  These projects have been reviewed by City Council to move forward in the G.O. Bond election in November.

7. What happened to the CIP project request that I submitted online, I don’t see it in the FY20 CIP Book or GO Bond Projects?

Each request is received by the City Engineer through the cityengineer@sugarlandtx.gov. Projects requested are weighed by importance and priority needs. If a project is not placed on the project list, it will be reviewed again the following budget process.

8. How do they know the cost of these projects? Have they received bids?

All quoted costs are based on engineer estimates with pricing from current market indices. By state law, and city ordinance, all work will be publicly bid. The projects identified have had previous work performed, including drainage studies and designs, pavement assessments and facilities studies.

9. When will the projects be completed?

The bonds will be issued over three years with projects expected to be completed within three to four years.

10. If the bonds are approved, does that guarantee the projects will be built?

Approving the bonds authorizes the city to incur debt to build the projects. The requested bond amount is based on the projects’ current estimated costs. If those costs change as a project moves forward, then the amount allocated to that project may not be enough to build it. The city may postpone construction of that particular project or seek additional money from the City Council. Staff will provide financial reporting to City Council to keep the public informed of anticipated project costs versus project budgets.

11. Why is the City holding a bond election rather than paying for the projects as we go?

The City issues bonds to finance projects that will benefit the City for decades, allowing the cost to be spread across the useful life of the project.  It would take many years to accumulate enough funding to pay for these projects as we go- during that time the projects don’t get built.

History has shown that construction inflation far outpaces interest costs and are not fixed as the interest will be on bonds. The City’s AAA-rated GO bonds carry the lowest possible interest rates which allow the projects to be financed economically over an appropriate period- usually about 20 years.

12. We voted for parks projects in 2013 and they still have not been completed. Why should we trust you to complete these proposed projects in a timely manner?

The parks bond projects were estimated to be completed within five to seven years. City Council recently committed to include the final parks bond projects in the 2020 proposed budget. In addition, City Council made the decision to increase the homestead exemption to 12 percent to offset the residential impact of the resulting 1 cent tax rate increase.

13. How many propositions will there be?

There will be 4 propositions on the November 2019 ballot.

14. What interest rate would we have to pay? For how long?

The interest rate is set by the bond market at the time the bonds are issued.  Since the City carries the highest possible rating for GO bonds, the interest rate is among the lowest available for municipal bonds.  Sugar Land issues bonds based on a 20-year maturity schedule, with at least half of the principal paying off in the first 10 years.  This aggressive repayment schedule also minimizes the interest cost that must be repaid.

15. Would it [issuance of bonds] affect our credit rating?

The current credit rating or bond rating of the City is AAA- the highest rating available.  Issuing additional bonds does not affect the bond rating as long as there is a sound financial plan to support the bonds, for example- recognizing that they cannot be funded within the existing tax rate and that the tax rate must be increased to fund the bonds.

16. Last bond election we [public] were told appraisals and sales tax could mitigate total tax increase. Why is this one different?

Over the last few years there has been continuous pressure on appraisal districts to reduce growth in appraised values.  The three-cent tax increase assumes no growth in taxable values and is the maximum anticipated impact to support the projects based on current taxable value in the City.   

Sales taxes are not pledged toward repayment of GO bonds; that statement is incorrect and was never made by the City. 

17. Will senior citizens be affected by this increase?

Yes. School districts often freeze taxes for people over 65 because they no longer access educational services; however, the city of Sugar Land continues to provide services to people of all ages.

18. If the bonds pass, is the City going to raise the value of my home?

The City does not set the value of your home. The Fort Bend County Appraisal District is the entity that sets your property’s valuation amount based on market values.  The City is not counting on any increases to taxable values to implement the bond program- with that, passage of all four bond propositions will increase the City portion of your tax bill by 3 cents or about $10 per month for the average Sugar Land home, to fund items such as drainage improvements, a public safety training facility, a public safety dispatch and emergency operations facility, new animal shelter and roadway improvement projects.  

19. What is the bond election's impact on Sugar Land's tax rate?

Should voters approve all propositions, City Council will raise the city's tax rate 3 cents for fiscal year 2021.   The $90 million in projects was identified by residents to address drainage, public safety/facilities, mobility and an animal shelter. The one-time tax rate increase of 3 cents represents an extra $10 per month for the average Sugar Land homeowner. With voter approval, the projects will be funded in future capital programs to begin in fiscal years 2021 to 2023.

20. What are property tax impacts if the bonds are approved?

The bonds represent a FY21 investment of approximately 3 cents on the tax rate or about $10 per month for the average Sugar Land homeowner, to fund items such as drainage improvements, a public safety training facility, a public safety dispatch and emergency operations facility, new animal shelter and roadway improvement projects.

21. Will the proposed tax rate increase be rescinded after the completion of the projects?

The tax rate is set each year by City Council and no City Council can bind future City Councils as to that rate as a matter of state law. By that same law, future City Councils could roll back the rate at any time or raise it at any time. If City Council votes to lower it while money is still owed on the debt, they would need to make cuts elsewhere in services to pay for it.

22. What will happen if this bond program does not pass?

If the city’s voters reject the bond program, bonds will not be issued for the projects included in the program, and the projects may remain unfunded.  The tax rate will not be raised if the bonds are not approved by voters to build the projects.

23. If one Bond proposition does not pass, can the funding be allocated to another priority, such as further drainage improvements in other areas?

If a bond proposition does not pass, it means that the funding associated with that proposition is not approved.

24. You give away tax revenue in the form of abatements that could be used to pay for these projects.

Cities across the nation compete to attract new businesses that add jobs and new revenue streams to local communities. Incentives are important tools to achieve economic development goals. The City does not lose money through such value-added tax abatements, as the development would not have occurred without the tax abatement. The projects result in significant property tax value and revenue to the City after the abatement expires (maximum 10 year terms).  In addition, economic growth generated by these agreements fully benefits the local school districts, as they do not participate in abatements.

25. Who does the City’s financial projections?

All financial projections for budgeting and financial forecasting purposes are conducted in-house by the City’s Finance and Budget Office staff.

26. How are funds repaid that are received through the issuance of General Obligation Bonds?

Property taxes are the main source of funds used to repay bonds issued through a General Obligation bond. General Obligation bonds are backed by the full faith and credit of the issuing jurisdiction, in this case the City of Sugar Land. This means the City is obligated to pay back the bonds plus interest by pledging revenue from ad valorem taxes. The City levies a property tax annually with a portion of the tax rate dedicated to the interest & sinking fund to repay general obligation bonds in the form of annual principal and interest payments.  

27. What is Sugar Land’s current level of debt, and what revenue sources are used to make those debt payments?

Including all debt backed by property taxes, the City has $288 million in outstanding principal and interest on bonds issued by the City and assumed by the City through annexation and dissolution of Municipal Utility Districts over time. This figure does not include debt supported by Sugar Land Regional Airport, the water utility system or economic development sales taxes. 

Property taxes are the only repayment source for General Obligation bonds. The City currently has tax-backed bonds that were inherited from Municipal Utility Districts upon annexation- the water/wastewater component of those bonds are supported by utility revenues.  Other bonds (Certificates of Obligation) are backed by property taxes but are supported with repayment from restricted revenue sources such as hotel occupancy taxes, lease revenues and public improvement district assessments. 

28. Is now a good time economically for the City to issue bonds? Do the economic conditions within the U.S. impact the bonds the City would issue to fund these propositions?

In the last 11 trading days, the DOW has been up more than 300 points three times, and down approximately 2,500 points the other eight days. This wild volatility in stocks is affecting bond yields which have been jumping up and down (mostly down) for much of the last month.  The financial forecast for the City is based on an average interest cost for the City to issue bonds and is not tied to the stock market performance. This is actually a very good time for the City to issue bonds as when bond yields are down that means that it costs less as they carry a lower interest rate.

29. How will these bonds affect interest rates?

The city’s issuance of bonds don’t affect interest rates as they are driven by the supply and demand of the national municipal bond market.  Bond yields are falling, which means that it is less costly for the city to borrow money through the issuance of bonds. Issuing bonds help cities to ensure intergenerational equity by spreading payments for assets and infrastructure over their useful lives. Intergenerational equity relates to equity between present and future generations and considers distribution of resources or burdens between generations.  This helps to ensure that residents today are not responsible for paying for the full cost of a project that will continue to benefit residents for decades in the future.

30. What is the city’s bond rating, and how does it impact these bonds?

The city carries a AAA bond rating from Standard & Poor’s and Fitch Ratings, which is the highest rating available. The ratings demonstrate confidence of the rating agencies in the city’s ability to manage its finances.  This allows the city to ensure our tax dollars go farther by borrowing funds at the lowest possible interest rates.  Each time the city prepares a new debt issue, rating agencies evaluate the city’s credit rating to assign a bond rating to the proposed bond issue as well as all outstanding bonds of the city.  The bonds that are proposed will also carry this rating, which means that the bonds will carry the lowest interest costs available based on municipal bond market conditions at the time they are issued.

31. If the bond election fails, can we use any of the funding capacity for other projects?

If one or more of the bond propositions fails, the city is prohibited from issuing certificates of obligation to fund any of the failed projects for three years.  Because the bond election requires a tax increase to fund, if one or more propositions fails, the actual tax increase will be re-evaluated and adjusted to support the approved propositions, which will also utilize current debt capacity. This decision will be made by City Council during the fiscal year 2021 budget process.

32. What checks and balances are in place to make sure that bond money is only spent on the projects as authorized by the voters?

There are several layers of checks and balances to ensure proper monitoring and handling of the bond program. These checks and balances begin at a staff level as part of the reporting delivered to City Council. Additionally, before any project begins, each must be presented to and approved by the City Council, which usually occurs through the annual Capital Improvement Program Budget Process. In addition, the City Council (at public meetings) must vote to issue the debt and approve design and construction contracts associated with each project. The City also goes through extensive auditing process by outside auditing agencies.

33. Will the bond funds be used for any other purpose?

No. Texas law requires that the proceeds of bonds authorized at the November 2019 special bond election be used only for projects described in the ballot questions.

34. If there is money left over after all the projects are built, can the city use the money for other CIP projects or other purposes?

No. Any funding approved in the November 2019 special election can only be used to complete projects which are set forth in the official Election Information Pamphlet and on the city’s website. The complete bond project list is also included in these FAQs.

35. How do bonds affect the Capital Improvement Plan?

Bonds are one source of funding for city capital projects. Projects that lack funding are not included in the Capital Improvement Program.

36. What kinds of bond-financed projects has Sugar Land completed in the past?

In 2013 the residents approved five Parks Bond projects; 2 of them have been completed including Brazos River Park Phase I and Crown Festival Site, and Imperial Connector Trail. The remaining three projects are Mid-Lake, First Colony Trail, and Ditch H Trail.  Some design and permitting has begun on these projects; construction has not started.

37. How many outstanding bonds is the city including in the 2019 Bond election?

None. There are no outstanding bonds in the proposed bond election.  Once bonds are issued, they do not need voter approval.

Bonds to be considered in the election will be utilized only to construct the projects identified.  When the City refinances outstanding bonds (similar to refinancing a mortgage), it is accomplished through the issuance of refunding bonds, which do not require approval by voters.  Refunding bonds are issued to achieve savings to the City over the remaining life of the bonds.  The City has minimum savings thresholds that must be met before it will consider issuing refunding bonds. 

38. When was the last time there was a General Obligation Bond on the ballot?

GO bonds were last on the ballot in November 2013 with propositions relating to Parks projects.  Prior to that, the last City GO bond election was January 1999.

39. How do the proposed drainage bond projects interact/coordinate with drainage projects that are ongoing within the City’s various LIDs and Fort Bend County?

The city of Sugar Land works closely with flood-control partners -- including Levee Improvement Districts and Fort Bend County -- tasked with protecting residents from river flooding.  Routine maintenance and targeted drainage projects are important to protect Sugar Land during extreme weather events. The city’s regional approach to flood-control projects recognizes that each agency has an important role to play in keeping residents safe.  Joint studies and agreements combined with ongoing communications ensure a coordinated effort. Projects included in the bond referendum build on efforts being implemented by area LIDs that are investing in increased pumping capacity and levee improvements. Project timing will be well coordinated with the LIDs’ projects to ensure the drainage system functions as an integrated system. Sugar Land takes the same approach with Fort Bend County on projects impacting city residents.