Chairman Ritter posted a comment about the water bond thread of discussion. Rather than having it buried in the comments section, I am going to post it separately, below.

Paul,

I can certainly understand your frustrations with the legislature not finding a dedicated source of revenue to fully implement our State Water Plan. As you know, I carried legislation this year that would have provided a mechanism for funding the plan. I also carried the joint resolution that resulted in Proposition 2. I cannot stress enough that a dedicated source of funding is only one component in the overall implementation of the plan which cannot be accomplished without bonding authority. The passage of Proposition 2 is a crucial step towards accomplishing this goal for the State of Texas.

Proposition 2 furthers our progress in meeting the future water needs of Texans. The importance of Proposition 2 is that it allows a self-supporting debt which is borrowed from the state through the Texas Water Development Board. These bonds would be issued only to provide funding requested by local communities, and the debt is then repaid by the borrowing entities.

Currently, many local entities are not able to access the financing necessary to complete projects without partnering with the state. The bonding authority enables a water provider to borrow funds backed by the good faith and credit of the state, lowering the cost of the loan, and thereby lowering the bottom line cost to the consumer. In fact, authorizing this type of bonding authority is the most fiscally conservative and responsible way to do business.

The failure of Proposition 2 means the imminent end of that partnership for water projects around the state, with or without a dedicated source of funding. I strongly support the passage of Proposition 2, and I hope that you will encourage your readers to do the same.

Representative Allan B. Ritter
Committee on Natural Resources, Chairman
Texas House of Representatives

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I appreciate Chairman Ritter’s contribution to the discussion. My encouragement is surely not needed, as I am certain that the water bonds will pass (voters know when they are getting something for nothing), and I will probably end up voting for them. One can only reflect how much better off the state would be if, at the start of the Perry governorship, it had invested in water and transportation infrastructure through normal revenue-raising means–highway bonds secured by an increase in the gasoline tax, and water bonds secured by a tap fee. The state has made little to no progress in these areas in that time. No doubt the public would scream bloody murder if there was a serious proposal to increase the gasoline tax, but it never occurs to them that their opposition to raising the gasoline tax dooms them to drive on toll roads, which are not only costlier, but in some cases are not meeting their traffic projections.

Tagged: Allan Ritt, proposition 2, water plan

[This post has been revised since it was first published yesterday to reflect that the water bonds will not have to be paid for with general revenue. Since then, a reader has posted the fiscal note. It says that the bonds include both self-supporting and not self-supporting debt, and that the latter (which is paid for from general revenue) counts against the state's 5% debt limit.]

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The answer is obvious, right? Of course we should vote for them. We’re in the middle of an historic drought.

Well, I’m not so sure about this. Governor Perry and the legislature are up to their old tricks. We’re supposed to have a pay-as-you-go fiscal system, but that is just a fiction. In fact, we’re borr0w-as-we-go. We borrow to build highways. We have borrowed to buy “equipment.” We borrow to build college buildings with tuition revenue bonds, knowing that the tuition will not cover the cost of the bonds and they will have to be paid out of general revenue. As will the water bonds. The debt service will eat away at the meagre general revenue that our tax system produces. Can you imagine how much it is going to cost to pay the debt service on $6 billion in water bonds?

The boosters are lining up behind Senate Joint Resolution 4, which will be proposition 2 on the November 8 ballot. In this case, the boosters are the H2O4Texas campaign, which they self-describe as “a newly created 501(c)4, nonprofit corporation – brought into existence to develop the Texans for Prop 2 Campaign, which will educate voters about the importance of passing Proposition 2 in November.” (more…)

Tagged: Lyle Larson, proposition 2, rick perry, water plan

Representative Otto posted the following comment on the blog, in response to my argument that the proposed amendment to allow homesteads to be valued only as a residence violates the principle that taxation should be equal and uniform, and I wanted readers to be aware of it. Mr. Otto writes:

This does not destroy fair and equal. It requires “residence homesteads” to be valued fairly and equally as a residence. Everyone seems to make the assumption that if “highest and best use” is used to value a homeowner’s lot value then that homeowner has numerous offers for his residence at commercial real estate values, or could easily put it on the market for that. That just isn’t so. What is happening is someone unlucky enough to be close to a commercial area can have their lot value affected by commercial land values in the area. What is being done under the “highest and best use” is creating unequal appraisals amongst homeowners and is resulting in condemnation by valuation. Prop 2 only benefits “residential homesteads”, where someone actually lives and claims his homestead. So your answer to the gentleman who tesitified before my select committee about his residential lot going from $30,000 in 2007 to $300,000 in 2008 (oh, and his home was dropped from $120,000 to $60,000 that sounds fair doesn’t it?) is sell your property for the windfall because if the appraisal district says it’s worth that under highest and best use, it MUST be so. How would you like to make his argument before the appraisal review board regarding highest and best use?

My comments:

I understand the problem here. It does seem unfair. No one wants to see a person driven out of his homestead due to higher taxes. Still, if an appraisal board makes its decision based upon current market conditions (and I am fully aware that appraisal boards are not necessarily fair and rational entities), then the owner of the property has a substantial asset that is presumably in an area of high real estate activity. That property can be sold for a considerable sum, and if the appraisal board has done its work properly — a big IF — then no injustice has been done. A lot of rural property has sold for just such reasons, to the benefit of a lot of landowners over the years. What is needed is the ability to review appraisal board decisions. Fortunately, Mr. Otto passed a bill last session providing for appeals to be heard by state hearing examiners. In general, I think it is a mistake to carve out exceptions to the principle of equal and uniform taxation, as well intentioned as this one is.

Tagged: john otto, proposition 2