Bond counsel warns Hutto council that proposed state debt rules could curb how cities borrow

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 tax-supported debt.

Key points presented to the council (all proposals were described as in-flux and not final law): - Ballot disclosures and timing: New statutory language could require bond-election ballot language to include a bold statement such as THIS IS A TAX INCREASE, and may eliminate the May uniform election date so November would be the sole uniform date for bond votes in most cases. - Annual debt cap: A proposed cap would limit a local government's maximum annual debt service for all outstanding obligations to 20% of the three-year historical average of revenue collections; the measure drew pushback in preliminary analysis and the committee substitute softened application by making the cap prospective (beginning Sept. 1) for many cities. - Certificates of obligation (COs) and tax notes: Proposals could tighten use of COs (nonvoted debt sometimes issued for urgent needs), lower the petition threshold permitting voters to force an election on a CO from 5% of qualified voters to 2% of registered voters, and limit CO use for nonemergency projects in some drafts. - Refunding and defeasance: Early drafts raised questions about how refunding bonds (issued to save debt-service cost) would be treated under any new cap; counsel said fairness concerns about counting refunded debt under a cap were being discussed.

Fowler emphasized uncertainty: “All this is subject to change,” he told council members, noting the pace of negotiations and that some measures were already revised after committee consideration. Fowler recommended communities with borrowing plans consider timing: if a statutory cutoff such as Sept. 1 were enacted, many jurisdictions might accelerate sales planned for later in the year to avoid new limits.

Council members pressed for clarification about local flexibility. Mayor Snyder and several councilmembers framed the debate as a broader opportunity to tighten local debt policies and be more transparent to taxpayers. One councilmember argued the state’s proposals could prompt cities to adopt stronger internal debt-management practices.

What the city will do next: The finance director and bond counsel will monitor the legislature and report back if final language moves to the governor. Fowler and staff advised that any local financing schedule should be reviewed now if the city plans to issue tax-supported debt this year.

Speakers: Bart Fowler, McCall Parkhurst & Horton (bond counsel); Alberta Barrett, Finance Director (presenting staff); Mayor Mike Snyder and multiple councilmembers asked questions during the presentation.

Authorities: Bill referenced in presentation — House Bill 19 (2025, provisions discussed); committee substitutes and related legislative drafts (described during presentation but not enacted into law at time of meeting).

Provenance: Presentation and Q&A occurred during item 9.3 of the May 15, 2025 Hutto City Council meeting.