City debt is repaid with property tax revenue. Issuing new debt does not automatically increase the tax rate. If there is sufficient revenue generated by the current tax rate to repay the proposed new debt, then that debt will not cause the tax rate to increase. That is the case here. The City identified an estimated tax increase necessary to support the investments included as part of the 2023 bond campaign. That debt was approved by voters and the tax rate was increased to the new rate identified during that campaign. The assessed value of existing development and new development has exceeded projections increasing the revenue generated by that rate. Further, the City was able to adjust its debt portfolio to make additional capacity to issue new debt without changing the tax rate.
What does this mean? It’s like refinancing your home mortgage, but, of course, more complex. Some debt will be retired, some will be restructured, some planned debt will be delayed or not issued. The net result is that it is possible to repay the requested debt if authorized by voters when issued according to the proposed financial plan without increasing the City’s tax rate.
Who checks the City’s math? This kind of detailed financial analysis and planning is performed by a Financial Advisor. This is a contracted firm that specializes in debt planning and issuance. The City of Rowlett uses Hilltop Securities to prepare and analyze multiyear financial plans. They assisted the City in identifying how much additional debt could be support by the existing tax rate. They estimate that that rate is sufficient to repay an additional $80 million of incurred debt. The total authorization requested in the May 4th propositions is $53.5 million.