Local Notes – August 13, 2024

The government is not immune to inflation. In fact, inflation is one of the worst challenges for government spending. This week, Richardson examined its budget and addressed inflation head-on. Sales tax revenue is down due to decreased consumer spending, a direct result of inflation. On the upside, revenue is up due to increased property values as more people move to the area. Overall, the city’s revenue is about where it was expected to be, which is a positive. However, the downside is that spending must account for inflation, leading to higher costs for services.

The budget reflects the reality of inflation, which often comes with higher interest rates, reduced consumer spending (hurting sales tax revenue), and an oversupply of office spaces that are going unleased. Dallas now has the second-highest office vacancy rate in the country due to overbuilding. With advancements in technology, those seeking office space are opting for newer and more modern buildings, which negatively impacts Richardson. The city plans to target outdated buildings for redevelopment.

To manage inflation in the new budget, the City Manager has proposed increasing water and sewer rates by 3%, which is still below the rate of inflation. Solid waste rates will go up by $2, and drainage fees by $1. The budget focuses on recruitment and retention, infrastructure, public safety, and economic development. Employee vacancy rates have decreased to 7%, and to ensure retention, the City Manager has proposed a 3% raise for police, fire, and general employees.

Meanwhile, in Frisco, the School Board held a workshop to discuss its future. While no final decisions were made, several proposals were considered. Frisco is no longer experiencing rapid growth, and the focus has shifted from building new schools with excess funds to something less glamorous: maintenance. It’s like buying a new outfit for work—it feels great initially, but then comes the upkeep: washing, ironing, and hanging it up. Maintenance isn’t as exciting as something new, which is why politicians often promise new projects rather than maintaining existing ones. But maintenance is crucial for longevity, and this is where Frisco finds itself with its schools. After rapid growth from 2000 to 2024, the time has come for significant maintenance, repairs, and updates.

Unlike Walmart, which can close stores and build new ones when maintenance becomes too burdensome, schools have to find ways to maintain their facilities. The Board is planning a bond package that would be divided into three separate bonds:

Bond A ($986 million): This would cover the majority of proposed projects, including 25-year renovations (updating older schools), building a new Staley Middle School campus, acquiring new furniture and fixtures, general maintenance, transportation, paving, landscaping, and finishing turf projects.

Bond B ($88.2 million): This would fund the technology portion of the district’s renovation/refresh.

Bond C ($11.2 million): This would cover the cost of a new tennis center. Proposals for covers for practice fields and a new multipurpose arena were rejected as not being cost-effective.

Frisco is in a strong financial position. While most of their previous bond funds have been spent on building up the district, they are on track to pay off these bonds by 2037. The district’s bond rating is excellent, so they should secure a favorable interest rate. Richardson is also considering floating bonds to fund city upgrades.

However, there’s a catch: under a two-year-old Texas law, all state bonds must be sold to investors who also invest in the oil and gun industries. This law was inspired by the outcry from conservatives who claimed it was an interference with capitalism when New York decided that its bonds should not be bought by those with investments in guns. Texas responded by mandating that its bonds must be sold to investors involved in oil and guns. This requirement means that, no matter how good the rate is, Frisco and Richardson’s bonds could have been offered at an even better rate if not for the restrictions. Texas is now facing higher interest rates on its bonds because investors do not appreciate the government dictating how they can use their money. They want their investments to be worthwhile. The increase in interest rates may be as small as 0.25%, but on the billion dollars that Frisco is likely to request, this will cost the district an additional $2.5 million—at the taxpayer’s expense. But then again, the Republican motto of Texas seems to be “guns before kids.”

-Bill Christman