A road bond proposal led by Midland City Councilmember J. Ross Lacy is set to be voted on by city council Tuesday with a substantially smaller price tag than initially proposed.
Due to concerns raised by residents and council members over the hike in property tax rates that would result from a $195 million bond, Lacy chose to lower it by almost 50 percent. Their decision Tuesday will determine whether or not a 5-year, $100MM bond will be placed on the November 7th ballot.
For the average $250,000 home, the initial proposal was estimated to have added $200 a year to a homeowner’s property tax bill. The new proposal will add about $100, based on a 25-year debt issuance and a total interest payment of $65 to $70 million. The bond would address roads that scored a “poor” rating of 50 and below on a recent paving condition index study in addition to water and sewer infrastructure, with 60 percent of the dollars going towards roads, 24 percent to utilities, and the rest towards engineering and ADA compliance.
If the bond proposal fails, state law prohibits the city from issuing any debt for roads and utilities for three years, which begs the question, “what if it fails?”
Fortunately, higher property taxes or bust isn’t the only option.
In May, the voter-rejected 4B sales tax election lowered Midland’s sales tax rate from 8.25 percent – the highest rate allowed by the state – to 8 percent, essentially leaving a quarter-cent tax up for grabs.
In addition to special-purpose taxes like the 4A and 4B that are focused on “quality of life” improvements, municipalities have the option (if approved by voters) to levy a special-purpose tax devoted entirely to roads, known as the Street Maintenance Sales Tax.
According to the state comptroller’s website, a Street Maintenance Sales Tax can be used to repair and maintain existing roads and sidewalks, which allows for an additional pay-as-you-go revenue stream that is also accountable to taxpayers due to its mandatory 4-year sunset period.
Since 2014, the City of Midland has dedicated an average of $10 MM annually to roads. Combined with the $10MM in revenue from a quarter-cent street maintenance sales tax, the city could have approximately $20 MM annually to dedicate towards roads and sewer – essentially the same amount that would be spent using a 5 year, $100MM bond.
The downside, of course, would be the slower pace that comes with a pay-as-you-go method. However, the upside is avoiding a major property tax hike as well as a $65MM plus interest bill.
Regardless, the fortunate increase of oil and gas activity in the Permian, coupled with the unfortunate neglect of road maintenance by former councils, have left the Midland community with a dilemma, and a change must be made if infrastructure needs are to be addressed.
The city council will vote to place the road bond on the ballot Tuesday, August 15 at 10am at City Hall. For information on how to contact your councilmember please visit: http://www.midlandtexas.gov/238/Mayor-City-Council