So as we know, the Houston pension reform bill that passed contains a provision that requires a vote on the pension obligation bonds that Mayor Turner intends to float as a down payment. Pension obligation bonds have been floated in the past, by Mayor White, without a vote, but for whatever the reason some members of the Senate insisted on it, so here we are. Now it turns out that with interest rates likely to increase later in the year, waiting till after a vote in November to float the bonds will cost the city millions in extra payments. You would think the responsible thing to do would be to float them now while it’s less expensive, and so Mayor Turner has suggested that as a possibility.
Mayor Sylvester Turner did not rule out Wednesday issuing the $1 billion in bonds that are central to his pension reform deal without a public referendum, a move that would sidestep a hotly debated requirement the Legislature added to ensure passage of the city-negotiated plan.
Turner said he and his staff are proceeding as though there will be a referendum, but the mayor said he may seek to issue the bonds without a vote if he can gain consensus among City Council members, state lawmakers and others that moving more quickly would benefit the city.
Specifically, he referenced the benefit of preempting an anticipated jump in interest rates. Waiting six to nine months to issue the bonds, the city finance department estimates, could cost taxpayers $135 million to $273 million more over the life of the debt.
“I find it highly unlikely that anything is going to take place other than the vote in November, and that’s how we’re proceeding,” Turner said. “If we can all agree on a certain course and it may be able to expedite things, then we’ll do that.
“I’m talking about agreement with everybody. We’ve come this far with everybody, both on the local levels as well as on the state level and my approach is to always move in collaboration with everyone. But if not, then we’ll proceed with the vote.”
Though much of the rhetoric surrounding the bill during legislative debates referenced that voters would have a chance to weigh in, the mayor’s team simply points to the text of the legislation as proof that they can proceed without a vote.
Current state law requires only that City Council enter into agreements with the pension funds that are to receive the bond proceeds – in this case, the police and municipal workers’ pension funds – in order to issue the bonds. The reform legislation adds the referendum requirement, but also states that the referendum provision applies only to those agreements signed on or after the effective date of the bill, which is July 1.
Turner plans to bring those agreements to council June 21, city officials said. Though adopting them would in no way obligate the city to issue the bonds without a vote, doing so would preserve that option.
Now you’d think the prospect of saving a couple hundred million bucks would appeal to pretty much everyone, but at the mere mention of this, several self-styled fiscal conservatives immediately contracted the vapors – seriously, CM Mike Knox walked out of the committee hearing upon being presented with this – so that would seem to scuttle the “if everyone is on the same page” possibility. And indeed, Mayor Turner has now walked back the idea and reassured everyone that we will indeed have a referendum, whatever the eventual cost may be. I get that not having a vote when everyone thought there was going to be a vote seems bait-and-switch-y, but 1) having a vote was not a requirement until people like Paul Bettencourt made it a requirement, and 2) interest rates are gonna go up, so it’s going to be more expensive to wait. But a deal’s a deal, so here we are. Hope everyone’s happy.