Most citizens and many public officials don't know exactly how local governments meet their financing needs. Most just assume local governments are financed with sales and property taxes until they start asking questions and demanding answers. Only then do they find that property taxes don't even cover City Hall Administrative expenses. Utility surcharges fund almost two-thirds of city spending in Brady!
Unless there is a bond election on the ballot that gets some publicity, citizens generally assume that current income meets current spending. Many of our readers were surprised to find that the City of Brady plans to borrow almost a half a million dollars this year. They were equally surprised to learn that servicing current City debt will cost over a million dollars this year alone. Debt service exceeds sales tax revenues. How did this happen without voter approval?
One way it can happen is for local government entities to issue Certificates of Obligation (CO) that do not require voter approval like bonds do. Using them to fund projects that the voters might not approve in a bond election is skirting the law's intent without actually breaking it.
The only way for citizens to protect themselves is to elect ethical people to local government. Local elections are important.
The following is an excerpt from the Bryan/College Station Tea Party website:
"A Certificate of Obligation is a form of debt available to governing councils in case of emergency – a God-created catastrophe – that needs immediate action without time for voter referendum. For example, when a hurricane destroys the police and emergency services building, there is no time to go through the process of voter referendum. The local council must be able to borrow the money to set up provisional buildings and necessary equipment for police and emergency services so that the community is served in continuity.
"When used as intended, Certificates of Obligation (CO) are necessary in the continuity of civil society. In researching state and local debt, Tea Party groups all across the nation are learning that the intent of Certificates of Obligation have been abused, with state and local officials assuming debt for non-emergency needs without tax payer knowledge".
For those interested in the laws governing Public Finance in Texas, here are three documents for viewing or download: