BUDA — Buda residents may see an increased tax rate if the 89th Texas Legislature passes House Bill 19 (HB 19).
At its meeting Tuesday, May 6, Buda City Council heard a presentation by Bianca Redmon, finance director for the city of Buda, regarding the pending legislation and potential impacts to the city and residents.
According to Redmon, the proposed HB 19 could impact the city’s ability to issue new tax-supported debt. HB 19 limits the amount of debt a municipality is allowed to issue, said Redmon. As the bill is currently written, the annual debt service payments should not exceed 20% of the average amount of property tax collections for the preceding three fiscal years.
“Looking at our actual property tax collections that the city has collected over the past three years, it averages out to about $8.9 million of property tax collections per year and if you do 20% of that, that amounts to about $1.8 million in annual debt service payments that the city would be limited to,” explained Redmon.
Currently, the city’s outstanding tax supported debt is $138,364,082, according to Redmon’s presentation. For fiscal year 2025, the city adopted annual debt service payments of $8,009,405, although this number was prior to issuing bonds in October 2024, so it has increased “a little bit more.”
The presentation listed 11 outstanding bond issuances that the city is currently paying on, with annual payments ranging from $133,789 to $3,084,594 per issuance for 2024-25.
Based on the adopted 2025 Capital Improvement Plan, future debt for the city amounts to $72,422,735, $38,464,735 of which is remaining 2021 General Obligation Bonds that have not been issued.
Financial advisors did an analysis of the 2021 issuance specifically, said Redmon, and this showed that the annual debt service payments on the issuance exceed the $1.8 million “magic number” per year.
“There’s a few things that we have to think about,” summarized Redmon. “One is that our preliminary values for property tax came in lower than the prior year. So, that would mean a tax rate increase on our [interest and sinking] rate.”
The model showed an increase from $0.2496 to $0.3247.
“Then, the other side of it is if we delay the issuance, then, of course, House Bill 19 could prevent the city from completing these projects that the city has already authorized,” said Redmond.
Prior to council discussion, Jennifer Ritter with Specialized Public Finance, Inc. clarified that the bill, as currently written, would go into effect Sept. 1, if it passes.
“If you want to do something, you have this little window where debt issued prior to Sept. 1 would be exempt from the 20% test, again, as currently drafted; we don’t know what’s going to happen,” said Ritter. “We just wanted to make you aware that this was potentially out there, so you can at least plan, potentially, for what may happen.”
Council member Matt Smith began the discussion with his concerns.
“… It almost seems like a no-brainer. The voters authorized it, we need these projects and, even if it means a slight tax increase, so be it. The community has spoken and we want this,” he said.
“So, let’s say we move forward, we issue the 38-and-a-half [million], and everything’s great, but then, House Bill 19 passes,” Smith continued. “We’re going to be immediately outside the guidelines — well outside the guidlelines … So, what does that future look like? Are we completely locked up on issuing bonds until we can pay down everything that we have out … Do we suffer some other larger penalty?”
Ritter detailed an analysis by the Municipal Advisory Council of Texas that showed that 80% of Texas cities, councils and school districts would currently be unable to issue debt.
“There were some movements with the House committee to try and put in some exceptions for maybe public safety, streets, things of that nature. Those were not added in. The only exception they did make was to make debt that had been issued prior — so, everything prior to Sept. 1 — not count,” Ritter explained. “But to your point, yes, you would not have any capacity going forward for quite some time.”
City manager Mich Grau explained that the bill was left pending in committee on April 21, so “it has not had any action. That’s a good sign for us.” According to Grau, if a bill doesn’t make it out of the House by May 15, it is “dead.”
“Good indications right now, at least, that this bill is not on the move,” he concluded.
“This puts small cities in a position where, we’ve been trying probably over the last 10 years to keep our tax rate low, right? But the city cannot operate without funds. And so now, we’re being squeezed from the state level” said council member LaVonia Horne-Williams. “I am opposed to raising the tax rate. I would be more in favor of selling the bonds if this becomes closer to knowing that it’s going to pass. I just think that people are already squeezed as much as they can be squeezed, at this point.”
“Groceries are high, gas is high, life expenses are high and the last thing that I know I want to do from my chair is talk about raising people’s tax rates,” Horne-Williams emphasized. “So, hopefully, this does not get out of the door by May 15.”
No action was taken. The item will come back for discussion at the May 20 meeting.
To hear the full conversation, visit bit.ly/3S0Gi7W.
