Skip to main content
Home

Main navigation

  • Centers & Programs
    • Centers
      • Center for Energy Studies
      • Center for Health and Biosciences
      • Center for the Middle East
      • Center for Public Finance
      • Center for the U.S. and Mexico
      • McNair Center
      Center for Energy Studies
      Providing new insights on the role of economics, policy and regulation in the performance and evolution of energy markets.
      More Details
      The globe at night, lights in populated areas illuminated
      Center for Health and Biosciences
      Advancing data-based policies that promote health and well-being in the U.S. and around the world.
      More Details
      Female healthcare worker lifts finger to press digital buttons featuring topical iconography
      Edward P. Djerejian Center for the Middle East
      Developing pragmatic policy approaches to the region’s enduring political, economic and societal concerns.
      More Details
      Topographic map of Middle East
      Center for Public Finance
      Delivering research and analysis on the effects of major U.S. fiscal policies.
      More Details
      Stack of coins with mathematical figure overlays
      Center for the U.S. and Mexico
      Strengthening the binational relationship by addressing major concerns on both sides of the border.
      More Details
      Textured flags of America and Mexico
      McNair Center for Entrepreneurship and Economic Growth
      Providing actionable policy analysis and recommendations that aim to expand the economy through private enterprise.
      More Details
      Professionals gather around a large table with laptops, printed documents and coffee cups for a business meeting
    • Programs
      • China Studies
      • Drug Policy
      • International Economics
      • Presidential Elections
      • Religion & Public Policy
      • Science & Technology Policy
      • Space Policy
      China Studies
      Analyzing the influence of the transnational circulation of people, technologies, commodities and ideas in China.
      Read More
      Person walks alongside large banner with Chinese characters
      Drug Policy
      Pursuing research and open debate to develop pragmatic drug policies based on common sense and driven by human rights interests.
      Read More
      Marijuana
      International Economics
      Studying timely issues in global economic policy as well as developmental policy in foreign countries.
      Read More
      International paper currencies stacked together, showing range of colors and styles
      Presidential Elections
      Offering nonpartisan analysis of elections to better understand the changing dynamics of presidential campaigns.
      Read More
      An assortment of campaign buttons from a variety of US elections and political pursuits are displayed in a collage
      Religion and Public Policy
      Exploring how religion and cultural factors interact with public policy issues.
      Read More
      A worn path stretches between rows of olive trees
      Science and Technology Policy
      Addressing a broad range of policy issues that affect scientists and their research.
      Read More
      A scientist picks up test tubes from a rack.
      Space Policy
      Focusing on U.S. space policy and the future of space travel.
      Read More
      The International Space Station (ISS) orbits the Earth at sunrise
  • Events
    The front of Baker Hall, from across the plaza, with fountain in foreground
    Center for Health and Biosciences | Roundtable
    Tue, Feb. 07, 2023 | 4:30 pm - 5:30 pm
    Baker Briefing: Addressing the Maternal Mortality Crisis in Texas See Details
    Child at border plays in the dirt with superhero toy
    Center for the U.S. and Mexico
    Thu, Feb. 23, 2023 | 5 pm - 7:30 pm
    Immigration Reform and the Impact on Children: A Town Hall Discussion See Details
    Tile mosaic over an entrance to Baker Hall that reads "A Bridge Between the World of Ideas and the World of Action"
    Center for the U.S. and Mexico | Edward P. Djerejian Center for the Middle East
    Wed, Mar. 15, 2023 | 5:30 pm - 7:30 pm
    Charting Paths Forward on Immigration Reform See Details
  • Experts
    • Biomedical Research
    • Child Health
    • China
    • Conflict Resolution in the Middle East
    • Domestic Health Policy
    • Drug Policy
    • Energy
    • Entrepreneurship and Economic Growth
    • Global Health
    • Health and Biosciences
    • Human Rights and Refugees
    • International Economics
    • Islam and Politics
    • Latin American Energy
    • Middle East
    • Political Economy of the Arab Gulf
    • Presidential Elections
    • Public Finance
    • Religion and Public Policy
    • Science and Technology
    • Space Policy
    • Texas Politics
    • U.S. and Iran
    • U.S. and Mexico
    • See All Experts
    • Experts in the News
  • Support
    • Join the Baker Roundtable
      Join the Baker Roundtable
      Learn more about the Baker Institute’s membership forum, which supports the mission of the institute and offers members exclusive access to experts and events.
      Read More
      RT
    • Major Gifts
      Major Gifts
      Major gifts provide the funds necessary for the Baker Institute to explore new areas of study and research, and expand current programs.
      Read More
      Wallace S. Wilson meeting with former British Prime Minister Tony Blair
    • Endowments
      Endowments
      Endowment gifts provide the Baker Institute with permanent resources that support research programs, fellows and scholars.
      Read More
      Pictured from left are William Martin, Katharine Neill Harris, Ambassador Edward Djerejian, Alfred C. Glassell, III, and Pam Lindberg
    • Planned Giving
      Planned Giving

      Plan a gift that will ensure lasting, meaningful support for policy programs important to you.

       

      Read More
      meeting
    • Corporate Support
      Corporate Support
      Corporations can become involved with the institute in a number of ways and see the benefit from the research conducted by our fellows and scholars.
      Read More
      Wide shot of the Doré Commons during a Shell Distinguished Lecture Series event featuring Wim Thomas
  • About
    • People
      People
      Learn more about the Baker Institute's leadership and get contact information for the administrative staff.
      Read More
      Secretary James A. Baker, III, stands with a portion of the Berlin Wall, outside of Baker Hall
    • Student Opportunities
      Student Opportunities
      Through the internships on campus and beyond, Rice students can explore careers in public policy, or simply become better informed about important issues of the day.
      Read More
      Amb. Edward P. Djerejian speaks with students outside Baker Hall
    • Annual Report
    • Blog
    • Contact
      Contact Us
      Complete a form for event, media or other inquiries, and get directions and parking information for the Baker Institute.
      Read More
      The front of Baker Hall, from across the plaza, with fountain in foreground
  • Contact
  • Research
    • Economics & Finance
      Economics & Finance
      Read More
    • Energy
      Latest Energy Research
      Summary on Latest Energy Research
      Read More
    • Foreign Policy
      Foreign Policy
      Read More
    • Domestic Policy
      Domestic Policy
      Read More
    • Health & Science
      Health & Science
      Read More
    • All Publications
  • Facebook
  • Youtube
  • Twitter
  • Linkedin
  • Economics & Finance
  • Energy
  • Foreign Policy
  • Domestic Policy
  • Health & Science
  • All Publications
Center for Public Finance | Commentary

Politicians in Texas Could be Using Anticipation Notes to Fund Projects Taxpayers Don’t Want

January 13, 2023 | John W. Diamond
Texas Capitol

Table of Contents

Author(s)

Head shot of public finance fellow John Diamond
John W. Diamond
Edward A. and Hermena Hancock Kelly Fellow in Public Finance | Director, Center for Public Finance
Read More

Share this Publication

  • Facebook
  • Twitter
  • Email
  • Linkedin
  • Print This Publication

Tags

public financeTexasTexas Legislature

With the 2023 Texas legislative session underway, there are several important issues that need to be addressed, such as reducing property taxes, implementing school finance reforms and increasing border security. But one crucial issue that Texas policymakers must tackle in this session is the potential misuse and abuse of anticipation notes — short-term debt securities issued by a state or local government to raise money for public projects.

In Texas, local governments can issue several different types of debt instruments including general obligation (GO) bonds, revenue bonds, certificates of obligation (COs), and anticipation notes (also referred to as tax notes). GO bonds are subject to voter approval and backed by property tax revenues. Revenue bonds are similar to GO bonds except they are backed by project revenues, such as toll road collections. COs are backed by either taxes or other revenues but cannot be used to fund a project that voters rejected in the preceding three years (a restriction added in 2015 by HB 1378 — and for the same reason we need to restrict the use of anticipation notes).

Anticipation notes, however, are different from these other debt instruments in several key ways. They are short-term notes that are backed by property taxes or other revenues, but they do not require voter approval and must mature within seven years. Formally codified into law in 1993 by the Texas Legislature, anticipation notes are useful for funding capital expenditures such as city vehicle purchases or initial start-up costs for larger construction projects. But unlike COs, they have not been restricted from funding projects that failed to previously get voter approval. Thus, taxpayers are at risk of having their voices ignored by misguided politicians.

Take, for example, the recent events in Amarillo:

In November 2020, Amarillo taxpayers voted on a proposal to update and expand an aging convention center at a cost of $275 million. The proposal was soundly rejected, with 61% of voters against the plan. On June 21, 2021, the City Council of Amarillo voted to enter into an agreement with Garfield Public/Private LLC for pre-development services. Mayor Ginger Nelson said, “I think we are in an exploratory phase, wanting to know what are the options? What are the different ways we pay for it and not just landing on the property taxpayers. That’s really what I see as a focus of this next step.”

But the facts tell a different story, one in which some city officials schemed to find a way to overturn the will of the voters. On May 5, 2022, the Tax Increment Reinvestment Zone (TIRZ) #1 board approved an amendment to include part of the Civic Center Complex into the TIRZ #1 project plan. The minutes of the meeting state the following:

"Mr. Freeman stated that there is a minor update to the plan but doesn’t affect the TIRZ in any of its financing. It is a mechanism for City Council to have flexibility in the Civic Center discussions. The City hired Garfield Public Private to study financial feasibility and private financing options and are now wrapping up their report. One of their suggestions was to include it in the downtown TIRZ plan so the City can qualify for different financial options. It is proposed to add a bullet point on page 21 of the plan that states, ‘Expansion and renovation, including the addition of an arena to the Amarillo Civic Center Complex, as well as improvements to the Amarillo Santa Fe Depot Property. It is not anticipated for the costs of these public improvements to be financed with TIRZ revenues.’"

Amarillo City Council held meetings on May 10, 2022, and May 24, 2022, that led to the approval of Ordinance 7980, which included the civic center project in TIRZ #1. In addition, at the May 24, 2022, City Council meeting, Ordinance 7985 — authorizing the issuance of $260,525,000 in anticipation notes to fund the civic center expansion — was approved. The largest anticipation note package prior to that was $60,000,000.

A concerned taxpayer filed a lawsuit against the City of Amarillo, and the case was heard in the 320th District Court before the Honorable William C. Sowder, an assigned judge out of Lubbock. The court ultimately found that the City of Amarillo failed to properly notify the public about various details related to the use of anticipation notes. The Findings of Facts and Conclusions of Law issued by the court in that case stated in part that the action taken to update the TIRZ #1 plan “was done in furtherance of a plan by the city to ultimately issue tax anticipation notes with the intent to do so with as little notice and discussion as possible.”

This step in the plan was essential to allowing the use anticipation notes to fund the project, because it allowed the debt to be characterized as interest and sinking debt that could be refinanced by longer-term debt instruments without voter approval. If the debt was not refinanced, then property taxes would have to almost double to fund the repayment of the shorter-term anticipation notes.

This should serve as a warning to state policymakers that Texas Government Code Chapter 1431, the code allowing the use of anticipation notes, needs to be modified to protect taxpayers and hold public officials accountable to the will of voters. One way to accomplish this is to implement a three-year waiting period before anticipation notes can be used to fund a project that was previously rejected by voters, similar to the rules for COs. In addition, the legislated language could be changed so that an ordinance adopting anticipation notes also imposes the taxes to be used to repay the debt. This is an easy political victory for state lawmakers and Texas taxpayers.

©2023 Rice University’s Baker Institute for Public Policy
  • Print This Publication
  • Share
    • Facebook
    • Twitter
    • Email
    • Linkedin

Related Research

Covid Graph
Center for Public Finance | Issue Brief

Assessing Recession Risk in a Post-pandemic Economy

Read More
Bitcoins lie on an income tax form.
Center for Public Finance | Issue Brief

Paying Your Taxes in Bitcoin? Maybe Not So Fast

Read More
Woman+Taxes+Calculator
Center for Public Finance | Issue Brief

Understanding the Tax Implications of Hobby Proceeds versus Business Income

Read More
  • Facebook
  • Youtube
  • Twitter
  • Linkedin
  • Donate Now
  • Media Inquiries
  • Membership
  • About the Institute
  • Rice.edu
Contact Us

6100 Main Street
Baker Hall MS-40, Suite 120
Houston, TX 77005

Email: bipp@rice.edu
Phone: 713-348-4683
Fax: 713-348-5993

Baker Institute Newsletter

The email newsletter of Rice University's Baker Institute for Public Policy provides a snapshot of institute news, research and upcoming events.

Sign Up

  • © Rice University's Baker Institute for Public Policy
  • Web Accessibility
  • Privacy Policy