Denton County’s population has grown 24 percent since 2003, but the amount of debt incurred — ostensibly to support that growth — has far outpaced it, a Denton Record-Chronicle analysis has found.

Borrowing by the county, cities, schools and freshwater supply districts has grown 115 percent since 2003, to enough to owe $6,442 for each man, woman and child in Denton County.

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In one of the many signs of Denton’s growth, construction along Loop 288 continues. While Denton County has grown about 24 percent since 2003, local government debt has grown 115 percent in the same period.

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That compares with the average local debt statewide of $6,103 per capita.

Local entities reported more than $4.1 billion in debt in 2008, more than two times the $1.9 billion in outstanding debt reported in 2003 to the Texas Bond Review Board, which tracks state and local government debt.

Most people are unaware of how much debt their local governments carry, said Peggy Venable, state director for Americans for Prosperity, which supports limited-government and free-market principles.

“The debt that we’re incurring locally is something that most taxpayers don’t focus on; they’re worried about the federal debt,” Venable said. “This is debt that our children and grandchildren will end up paying.”

Growing obligations

National leaders have come under fire recently, particularly with the “tea party” demonstrations of April 15, for increasing the national debt, now about $37,000 per capita, according to data from the U.S. Treasury and the U.S. Census.

Government leaders promote local bond elections by saying they’ll add only a penny or two to the tax rate, but they usually don’t talk about cumulative debt and interest payments, Venable said.

“At some point, there will be so much debt that our cities and counties and school districts will not get a triple-A rating and they’ll have to pay a higher interest rate,” she said. “I think there will be a very rude awakening.”

While the county’s debt has doubled over the past six years, County Judge Mary Horn insists the county is not overextended.

“We just borrowed some more money a couple weeks ago in court for a bunch of stuff,” Horn said. “We were hoping to get four or five people to bid and ended up with nine. We ended up borrowing right at $104 million at 4.4 percent, which is a good interest rate.”

Horn touted the AAA bond rating the county received recently.

“That saves you a lot of money; they don’t give you those ratings unless they think you are pretty frugal, have good fiscal management,” Horn said.

The county would never borrow more than it could handle, she said.

“I won’t let that happen, and I doubt the bond counsel or auditors would let that happen,” Horn said.

The fastest-growing sector of local government debt in Denton County was issued by freshwater supply districts and other “development districts.” Since 2003, those special taxing districts incurred nearly a threefold increase in debt — from $88 million to $342 million among 18 districts that reported debt in 2008, the latest period information was available.

Those districts are formed as public subdivisions, but with governance unlike towns and cities. A developer sets up the district as part of a financing package, paying upfront to build major roads and water and sewer lines. Then, the district reimburses the developer and counts the infrastructure as assets.

According to records of the Texas Bond Review Board, the largest debt loads are in the freshwater supply districts of Savannah, with $14,931 per capita for Fresh Water Supply District No. 10, and Lantana, with $10,048 per capita for Fresh Water Supply District No. 6.

How much is too much?

Denton’s finance director, Bryan Langley, said there really isn’t a benchmark for the amount of debt a city should carry per capita. The city’s borrowing capacity is limited, instead, by its property tax rate and other revenue.

“The fundamental question, really, is what are the needs of a city, county, school or freshwater district and what is the willingness of people to pay for them,” Langley said.

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Construction work now under way at Denton High School was part of a November 2007 bond package in which voters approved $282 million in bonds that included funding to refurbish and expand existing campuses and provide for two new elementary schools and one new middle school. As part of that package, $37 million was set aside for updates at Denton High, including additional classroom space, renovations to athletic facilities, and a new guidance and counseling center.

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At $3,924, the city of Denton has the highest per capita rate of bond debt in the county. But Denton ranks seventh in the county when considering the debt as a percent of total property values — the value of all houses, businesses and gas wells combined. Aubrey, Krum, Sanger, Ponder, The Colony and Justin rank first through sixth, respectively, on that scale.

The details of what is being financed are important, he said, since the debt spreads out the cost of a long-term project over 20 to 30 years, or more, and includes collecting on that debt from people who use the project in the future.

The most recent population projections by the North Central Texas Council of Governments estimate Denton County growing about 100,000 residents every five years until 2030, when the county population is expected to top 1 million.

Denton usually issues voter-approved general obligation bonds for big projects such as roads and drainage improvements. Council-approved certificates of obligation fund shorter-term projects, such as facility repairs and vehicle purchases, Langley said. Long-term water, sewer and electricity projects are paid for with revenue bonds, which are backed by the income the city expects from water, sewer and electric bills.

Revenue bonds also are council-approved.

About 14 percent of the city’s debt is from certificates of obligation — bonds that do not require the city to call an election seeking voter approval.

Rick Woolfolk, a member of the city’s bond oversight committee, has questioned the use of certificates of obligation, saying they carry a slightly higher interest rate and limit the city’s ability to issue voter-approved general obligation bonds. His committee tracks progress on projects voters approved in the city’s last bond election, in 2005.

“If the citizens are being asked to evaluate the priority of needs for the city and there are certain things that are out of the purview of the citizens committee, it just seems like it somewhat defeats the overall purpose of a citizens committee,” said Woolfolk, a former Denton school board member.

Tipping point for schools

Overall, school district debt grew more than 90 percent from 2003 to 2008 in Denton County.

The Denton school district holds a principal debt of $643 million and an estimated $1.2 billion in principal and interest costs combined — about $4,702 per capita.

District Superintendent Ray Braswell said a major reason for the debt is a boom in enrollment during the last decade. Denton, the fifth-fastest-growing school system in the state, has built and opened 20 facilities in the last 10 years, including 10 in the last four years.

While maintaining its AA bond rating, the biggest issue for the district has been construction costs, which have increased dramatically since hurricanes Katrina and Rita in 2005, Braswell said. Since 1991, costs for elementary and middle schools statewide have increased by 300 percent, he said, with high school costs climbing more than 340 percent.

And because of the district’s relative wealth-to-student ratio, Braswell said, the district does not receive state facilities funding, so 100 percent of construction costs fall on local taxpayers.

“Prior to hurricanes Rita and Katrina, the district could basically let ‘growth pay for growth,’” Braswell said. “This meant the costs of new facilities could be covered by the increases in the tax base. With the increase in the costs of construction post-Katrina, this is no longer the case of growth paying for growth.”

The maximum tax rate that school districts can assess to pay for school construction is set by the Texas Legislature at 50 cents per $100 valuation.

Denton is inching toward the maximum rate, with local taxpayers paying 45 cents per $100. Each additional penny could allow the district to borrow between $800,000 and $1 million more to build new schools.

Braswell testified before the Legislature this spring in support of raising the cap above the current 50-cent maximum, but the measure is likely stalled.

Without relief from the state — either in the funding formula or from state facilities funding — district officials will seek alternatives, Braswell said. Some alternatives include considering construction options that don’t involve traditional brick-and-mortar, or different organizational arrangements, such as ninth-grade centers, or building larger schools, which Braswell said is counter to the district’s teaching preference.

“The big issue for us is that we would like to be considered for state funding in facilities,” he said. “It would certainly lift the burden from the taxpayers and help with some of the outstanding debt.”

PEGGY HEINKEL-WOLFE can be reached at 940-566-6881. Her e-mail address is pheinkel-wolfe@dentonrc.com .

LOWELL BROWN can be reached at 940-566-6882. His address is lmbrown@dentonrc.com .

BRITNEY TABOR can be reached at 940-566-6876. Her e-mail address is btabor@dentonrc.com .

BJ LEWIS can be reached at 940-566-6875. His address is blewis@dentonrc.com .

According to the latest figures reported to the Texas Bond Review Board, local debt per capita varies widely throughout the county. Public debt per capita in some special taxing districts ranks among the highest. The ten combinations listed below include the county government’s debt of $679.68 per person.

Both population and local debt has increased from 2003 to 2008, but locally that growth far outpaced statewide averages. A comparison, compiled from the latest Texas Bond Review Board report, is provided below.

*Excludes $310 million in debt reported by the Upper Trinity Regional Water District

The Texas Bond Review Board calculates the amount of tax-supported debt per capita and as a percentage of total property values. Denton County carries $678.42 of bond debt per capita; or about 1 percent of total property values. Below are the three highest rates of debt in both categories for Denton County cities, schools and water supply districts. For a complete list of debt rates of Denton County cities, schools and water districts, go to www.dentonrc.com .

DEBT PER PERSON

The amount of tax-supported debt varies in different parts of the county. According to the Texas Bond Review Board, the county government itself owes $432,653,862 in tax-supported debt, about $680 per person in Denton County. The bond review board also calculates how much debt is held against value of properties. Click below to learn how much city, school debt or fresh water supply district debt is being carried in your area.

City debt per capita

City debt, as a percentage of total property values

School debt per capita

School debt, as a percentage of total property values

Fresh water (and other water) supply district debt per capita

Fresh water (and other water) supply district, as a percentage of total property values

CITY DEBT PER CAPITA

CITY DEBT, AS A PERCENTAGE OF TOTAL PROPERTY VALUES

Source: Texas Bond Review Board      

FRESH WATER (AND OTHER WATER) SUPPLY DISTRICT DEBT PER CAPITA

FRESH WATER (AND OTHER WATER) SUPPLY DISTRICT, AS A PERCENTAGE OF TOTAL PROPERTY VALUES