Nearly five years after Houston-area voters overwhelmingly approved a $3.5 billion bond initiative to fund the Metropolitan Transit Agency of Harris County’s “MetroNext” expansion plan, not a single bond has been issued.
As Metro’s newly appointed leadership team continues retooling and carving out portions of the original MetroNext plan, some residents are left wondering how a changing vision for Metro’s future will impact the billions of dollars in debt they already have agreed to take on.
Houston Landing spoke with two financial experts to determine what happens to the 2019 bonds while the MetroNext plan is in flux.
During a Tuesday meeting of the Metro board of directors’ Strategic Planning Committee, transit agency leaders decided to indefinitely delay development of the University Corridor bus rapid transit line, a core element of the MetroNext program.
Do the bonds currently exist?
Although voters approved Metro’s debt issue with nearly 68 percent of the vote in 2019, the transit agency has not yet sold any of the bonds.
By not selling any debt, the bonds do not actually exist, said Matt Fabian, a partner at Municipal Market Analytics, an independent research group covering the U.S. municipal bond market.
“The bonds are still an idea,” Fabian said. “They don’t exist. And if they don’t sell them, then they don’t sell them.”
Steven Craig, an economics professor at the University of Houston, agreed.
“If they haven’t sold any of the bonds, that means they haven’t borrowed any of the money,” Craig said.
Is Metro required to sell the bonds?
A bond election does not require a government agency to actually issue bonds, Fabian said, and it’s quite common for governments to have unissued debt.
“They don’t have to issue bonds that are voter approved,” he said, citing the state of California, which he said has tens of billions of dollars of voter approved debt that has never been issued.
“It’s very common in the world of government to just not go through with it for whatever reason,” Fabian added. “It’s no big deal.”
That aligns with previous remarks by Metro Chair Elizabeth Gonzalez Brock, who previously told the Landing that the public’s 2019 support of the bond referendum was not a binding contract.
“The public authorized (the bond), they didn’t mandate it,” Brock said. “The public expects us to be very nimble and expects us to be responsible with taxpayer dollars.”
Just because bonds have not yet been issued, however, does not mean they could not be sold in the future.
Craig said that he has never heard of a bond referendum expiring, opening up the 2019 vote to be used as a vehicle to issue bonds going forward.
If Metro were to sell MetroNext bonds in the future while relying on the 2019 referendum, Fabian said, the transit agency would need to ensure its project plan aligns with the language and intent of the 2019 ballot initiative.
What exactly is Metro’s plan?
Despite Tuesday’s announcement that the agency would shelve the University BRT project , MetroNext as a whole remains alive, according to Chief Financial Officer George Fotinos. He said MetroNext includes numerous projects, and that the agency would still be pursuing other parts of the program and issuing bonds for those projects.
The transit agency is determining what the final version of the plan will look like, as the agency leadership’s vision for the future of transit in Houston has changed since 2019.
“There’s still planning and anticipation to issue that debt,” Fotinos said, “but not in the fashion that we’ve been on the current course.”
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