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Bond counsel warns Hutto council that proposed state debt rules could curb how cities borrow
Summary
Bond counsel told the Hutto council that several proposals floated during the Texas legislative session — most notably elements of House Bill 19 — could reshape municipal debt rules, including a proposed 20% cap on annual debt service and restrictions on certificate of obligation use; none of the proposals were final law.
Bond counsel told the Hutto City Council on Thursday that legislative proposals under discussion at the Texas Capitol could substantially change how cities issue and repay debt, and urged municipalities to monitor the fast-moving process.
“House Bill 19 has now died at the legislature, although the provisions within House Bill 19 are still very much alive,” said Bart Fowler of McCall, Parkhurst & Horton, the city’s bond counsel. Fowler walked council members through draft provisions that remained active and could be attached to other bills.
Why it matters: The proposals discussed would affect both voted and nonvoted municipal debt. Fowler told the council the most consequential single idea under discussion was a proposed cap that would limit a city’s maximum annual debt service to 20% of the three-year historical average of revenue collections. He said that number, as drafted, could restrict the ability of many Texas local governments to issue new…
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