U.S. voters approved over $10 billion worth of new municipal bonds for local governments recently. The voting returns showed a consistently strong support for large debt issues, like Dallas schools, Houston roads and Denver’s stock show and convention facilities. Since interest rates continue to hover at 50-year lows, “localities nationwide sought authority Tuesday to issue $24 billion of debt for water systems, roads and economic development.”
Municipalities across the nation have been borrowing money to take advantage of the low interest rates and cut the cost of existing debt. However, the municipalities have also been reluctant to take on new projects. “Borrowing costs have averaged just under 4 percent since 2012, “the lowest since the mid-1960s, according to Bond Buyer’s index of 20-year yields.”
The economy’s rebound has many government officials feeling confident enough to ask for voters’ permission to borrow money for projects. “The approved borrowings would make a small contribution toward some of the $3.6 trillion of investment in infrastructure that the American Society of Civil Engineers estimates the U.S. needs by 2020.”
The $1.6 billion worth of new debt for Dallas Independent School District will be used to replace and renovate schools that are more than a fifty years old. Meanwhile, “Denver voters approved $778 million of debt to upgrade a facility for the National Western Stock Show and for improvements to a convention center.” In Harris County, “where Houston is located, voters approved $848 million of debt for road improvements, parks and flood control, according to county election returns.”
Two large issues also failed to pass during the vote. In Pima County Arizona, voters rejected $816 million worth of bonds that were intended for use on roads, highways, economic development and tourism. Additionally, Travis County, Texas voters rejected $287.3 million for a new courthouse in downtown Austin.
The record for bond proposals, “in a November general election was in 2006, when municipalities asked for $78.6 billion and voters approved $69.6 billion…November general-election ballets typically contain more debt in even years, when congressional and presidential elections are held, than in odd-numbered ones. Last year voters were asked to decide on $44 billion of bonds, more than twice the amount sought in 2010, and passed about 85 percent.”
As 2016’s presidential election rapidly approaches, voters can definitely expect more votes on bonds. This year’s voters approved 79% of the proposed $23.8 billion—the most since 2007 and the worst economic recession since the 1930s. As the markets evolve and a new vote on interest rates looms, your household may consider taking out a loan on projects of your own. If you have questions or comments, contact an expert at Apex Financial Advisors today to make sure you get the help you need to develop a financial plan that works for you—and your portfolio.