What is a General Obligation Bond? A General Obligation bond is a financing tool that a city can use to finance large capital projects over a multiyear period, similar to a home mortgage. A bond permits the project costs to be amortized over a period that more closely matches its useful life.
Why issue bonds? General Obligation bonds are an alternative to funding projects on a “pay as you go” basis. Bonds are used to allow the City to pay for more costly projects over a longer period of time. Otherwise, to fund capital projects on a “pay as you go” approach, the tax rate would have to be increased sufficiently to generate additional revenue to pay for projects.
What kind of credit rating does Friendswood have? The City’s current credit rating, issued by Standard & Poor’s, is AA+ on General Obligation Bonds and AA- on Revenue Bonds.
If the propositions are approved, what will this do to my taxes? If approved, the bonds would be sold in multiple issues. The tax rate would increase in increments over several years to a projected maximum increase of about 10 cents. This rate would gradually decline if no additional bonds are issued or property values are greater than projected.
Does the tax freeze on homesteads of taxpayers 65 years of age or older apply in the context of a General Obligation bond election? Yes. State law provides that there may be no tax increase above the frozen level on the homestead of taxpayers 65 years of age and older who have applied for and received the Age 65 tax freeze on their homestead.
If a bond proposition is approved, when will construction of that project begin? Voter approval of a bond proposition only authorizes funding for the project. Before construction, the City must take steps to plan, design, and bid a project. Therefore, depending upon the type of project, the process from planning to construction may take a number of months. With respect to the drainage proposition, the dollar amount identified for this bond measure represents seed money seeking local, state, and federal partnerships to complete improvements to Clear Creek.
What happens if the bonds are not approved by the voters? If a bond proposition for a particular purpose does not pass and funding is not otherwise available to complete that project, that project could be eliminated from the City’s long-term capital improvement plan or it could be included in a future bond package.