In 2012, Austin voters approved $306.6 million in bonds. The next year, they approved $65 million more. In 2016, $720 million for transportation projects got the green light. Then just last year, voters gave the city the go-ahead to issue $925 million more in debt, including $250 million for affordable housing.

And when 2020 arrives, Austinites could be pondering passage of a transit bond referendum of possibly $1 billion or more, backed — like all the previous bond packages — by their property taxes.

This growing amount of what some would consider red ink on Austin's books has led conservative think tanks such as the Texas Public Policy Foundation to raise alarms about the city's debt load. Yet credit rating agencies continue to see the city of Austin and its government-run businesses — Austin Energy, the water utility, the convention center and Austin-Bergstrom International Airport — as good investments that verge on being boring because of their lack of risk.

Even now, as Austin Energy prepares to issue an estimated $465 million in revenue bonds to buy a troubled biomass power plant in East Texas, the utility's credit rating recently was upgraded. That's despite the utility's debt increasing 33% once the revenue bonds have been issued.

Municipal debt can consist of a number of things. Most cities issue debt for capital projects — think road improvements or construction of a public library or fire station — that are typically approved by voters and funded by property taxes. However, large portions of debt often are paid off through other sources of revenue, such as water or electricity bills. That debt typically pays for infrastructure improvements related to the revenue source.

Buying the little-used biomass plant near Nacogdoches will push Austin's total debt to nearly $6.5 billion. The city will spend at least an estimated $9.8 billion paying it all back with interest, according to the Texas Bond Review Board. But even though the projected debt repayment is more than twice the city's yearly budget (and nearly 10 times its annual general fund expenditures), credit rating agencies haven't blinked.

The three major credit rating agencies — Moody's, Standard and Poor's, and Fitch Ratings — have all given Austin the top rating of AAA, meaning the capital city boasts a better credit score than any other large city in Texas.

"Austin's ... credit profile benefits from the vibrant and rapidly growing local economy as well as the added strength to the employment and economic base provided by two large institutions, the University of Texas and the State Capitol," the Moody's report concluded.

The upgraded ratings don't sway James Quintero, the director of the Center for Local Governance at the Texas Public Policy Foundation, from his view that Austin has created a financial swamp for local taxpayers.

"The city of Austin is absolutely drowning in debt," Quintero said. "Last year, its outstanding debt totaled $9.4 billion or almost $10,000 owed per person. That much debt means higher taxes, more government and a tougher time making it all work.

"City hall is borrowing money we don't have to pay for things we don't need. It's time to slow down the spending and look for ways to stretch our dollars further."

The Texas Public Policy Foundation has made a habit of criticizing Austin's financial operations. Leading up to the 2018 general election, the foundation's analysis of the city's debt was submitted in a brief to the Texas Supreme Court as part of a squabble about ballot language for a voter proposition, one calling for an external audit of Austin's finances.

The proposition didn't pass, with 58 percent voting against it.

In a statement to the American-Statesman, the city of Austin characterized the Texas Public Policy Foundation's analysis as overly simplistic and said it disregards the basic structure of Austin's municipal government.



For one, most cities in Texas do not own their electric utility. San Antonio is the only other large city in the state that operates an electric utility, which it considers separate from its municipal budget. Austin Energy expenditures account for 31 percent of the city's $4.1 billion budget for the 2019 fiscal year.

Additionally, the airport, the water utility and the Austin Convention Center make up 21 percent of the city's budget. The repayment of debt issued for those entities is funded through usage fees, not property taxes.

Bryan J. Rivera, the city's deputy treasurer, said it is more accurate to calculate Austin's debt on a per capita basis related to general obligation debt. In that regard, Austin has less debt per capita than Dallas, Houston and El Paso, according to figures from the U.S. Census Bureau and the Texas Bond Review Board.

Bonds are an optimum way to finance large-scale projects because they create "inter-generational equity," Rivera said. Projects authorized now are not only being paid for by current residents; future residents also will share the costs as loans are retired in decades to come.

The $125 million Central Library, which opened in the fall of 2017, comes to mind as an example of tried-and-true public financing, Rivera said.

Current residents "are paying for that particular library through the debt service tax rate, and they are helping fund the repayment of that debt," Rivera said. "But you also have people moving here 10 years from now, 20 years from now, and they will also help pay for that debt. The same goes for roads and other improvements."

Rivera said the city's treasury office is very mindful of the credit ratings it receives. On that front, there was some good news this month.

On May 14, Fitch Ratings upgraded Austin Energy's credit rating for revenue bonds to "AA," the third-highest rating the company gives to investments, deeming them a high quality investment with very low risk.

Kathryn Masterson, Fitch Ratings' primary analyst in rating Austin Energy's latest issuance of bonds to purchase the biomass plant, said the utility's status as a monopoly, its growing customer base and its relatively low electricity rates contributed to the credit rating bump. (Austin Energy's average residential rate is roughly 8.8 percent cheaper than the average in Texas, according to figures from the U.S. Energy Information Administration and Austin Energy.)

"One of the reasons for our upgrade this time in the drum line of operating costs was that they have been able to add renewables at a rapid pace and haven’t seen any increase in operating costs," Masterson said.

One of the few knocks against the utility's credit rating is that it transfers roughly $110 million of its $1.4 billion in revenue to the city's general fund to help pay for things such as police, fire and emergency medical services.