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1. What is a bond election?

Municipal bonds allow cities to fund major projects such as roads, parks, facilities and other capital expenses. Bonds are issued and repaid over an extended period of time, similar to the way many buyers finance the purchase of a home. This strategy helps keep costs more equitable between current and future residents - after all, many of the people who will enjoy these amenities haven’t even moved here yet!

Before issuing bonds which could potentially impact the tax rate, Texas cities are required to put any bond proposition to a vote. If a proposition receives more than 50% of the vote, bonds may be issued for the purpose specified on the ballot.

2. How does municipal bond funding work?

Municipal bonds are debt securities issued by state and local governments, or their authorized agencies, to borrow or raise money for public purposes such as roadways, facilities, water/sewer infrastructure.

In a General Obligation (GO) bond, individuals, insurance companies, pension plans, and other investors purchase the bonds providing the City money to pay for capital projects. The City’s bond debt is repaid through the property tax (also referred to as “ad valorem” tax) paid by owners of taxable property in Allen.

3. How are projects selected for bond funding?

In Allen, residents lead the charge to select and prioritize projects to be paid for by bonds, set proposed bond package amounts and determine what impact (if any) the use of bond funds might have on the tax rate. Discussions are guided by a knowledgeable citizen committee with a history of service to Allen, with presentations and supplemental information provided by City of Allen staff.

4. Will this bond election raise the City tax rate?

Municipalities are required to state any potential tax increase projected as part of a bond package. Based on a series of financial models that account for the continued growth and economic activity of Allen and the schedule to pay off existing debt, the sale of new bonds for this proposed bond package would not result in an increase to the current property tax rate. Even with voter approval, the City of Allen determines the timing for projects in a fiscally conservative manner based on economic conditions, impact to operations and other budget considerations.

5. Why does the City use bond debt to fund projects?

The City of Allen uses bond debt only when it’s necessary to fund needed public infrastructure, facilities or capital investments that will service the city for 20 years or longer. Bond funding spreads the cost to as many residents and businesses as possible over an extended period of time such that future residents and businesses also help fund community assets that benefit them. We call it intergenerational equity.

6. How long will it take to repay bond debt money?

The City of Allen will repay bond debt within 20 years of bonds being sold. In the past, the City has repaid bond debt sooner than the anticipated 20 years. The City also has refinanced the sale of a bond series to lower interest repayment or pay off the debt sooner.

7. How much will the interest be for bond debt on proposed projects?

The City of Allen will pay interest when the bonds are sold. The market determines the interest rates at the time the City sells the bonds; however, the City of Allen pays low interest rates due to excellent bond ratings. City of Allen’s bond rating is Aa1 from Moody’s Investors Service. The rating reflects strong fiscal management and the steady growth of our tax base. This rating provides significant savings to Allen taxpayers by qualifying the City of Allen for low interest rates.

8. Does the City have to use bond debt to build new improvements?

Yes. In order to pay for significant capital investments and improvements, all cities must utilize bond funding. The City of Allen implements a public-led bond funding program to determine projects that will be proposed for funding over a period of five to seven years. This package of bond propositions goes to the Allen voters for approval. Even with voter approval, the City of Allen determines the timing for projects in a fiscally conservative manner based on economic conditions, impact to operations and other budget considerations.

9. How is the tax rate affected if voters do not approve bond funding?

Without bond funding, the City would have to utilize other funding options for large capital projects which would be calculated into setting the tax rate.

Municipal infrastructure is expensive. The multitude of city assets such as roadways, sewer/water infrastructure, facilities, parks/trails, public safety equipment/technology and quality of life amenities all require millions of dollars in investment or reinvestment to build or maintain to the high standards set by the Allen community. The city budgets for many capital improvements on an annual basis for facility repairs, roadway and traffic signal upgrades, sewer/water infrastructure maintenance, and technology and vehicle replacement needs.

Beyond some of the smaller capital improvements that are included in the City’s annual budget, there are three ways to fund more expensive or larger capital improvements:

1. The sale of voter-approved general obligation bonds – This method spreads the cost to as many residents and businesses as possible over an extended period making it an affordable option and resulting in the expense being shared by current future residents and businesses that will benefit by the new or improved asset. It funds the purchase or development/construction of the asset at the time it is needed based on current market conditions.
   
   
2. Cash reserve financing – This allocates a portion of the City’s budget to a cash reserve fund for a designated future capital expense (and factors this into setting the tax rate). This results in residents paying taxes for capital expenses long before they are ever needed. It subjects the cash reserve savings to inflationary conditions that may reduce the City’s purchasing power at the time the purchase, development/construction is needed. It is also difficult to project large capital expenses 15-20 years ahead of when they may be needed due to many economic conditions, changing community demographics and needs, and advances in technology and service delivery.
   
   
3. Cash financing – This requires the City to cash fund more projects on an annual basis which increases the budget and the tax rate accordingly. This option limits the scope and types of projects that can be funded on an annual basis due to state-mandated tax revenue caps unless the tax rate increase over set thresholds is voter approved. Even with benefit of a voter approved tax rate, it would be difficult to cash finance a significant capital expense such as a major park redevelopment or new police headquarters within an annual budget. 

10. What are some examples of existing community projects/enhancements that were funded by bonds?

Examples of projects used today that were paid for with municipal bonds are: Allen Public Library ($10M approved in 2000); Allen Senior Recreation Center ($23.5M approved in 2002); Fire Station #5 ($3.74M in 2007); and ongoing street improvements throughout Allen ($23.89M approved in 2016). Read more on projects funded by 2016 bond funds

11. Does the City fund school facilities like the football stadium?

Allen voters approved the football stadium as part of a bond package for Allen Independent School District (Allen ISD), which is a separate taxing entity from the City of Allen. For this budget year, taxes assessed per $100,000 of property value for the City of Allen are .4205, and those assessed by Allen ISD are 1.1412. The remaining property taxes for Collin College are .081220 and Collin County are .149343.

Total property taxes for Allen homeowners by the various taxing entities may include homestead, over 65, or disabled exemptions. You can find information on the taxing entities, exemptions and rates at the Collin County Appraisal District.

12. How were bond projects selected?

Five subcommittees were established by Allen City Council to focus on the following topics: Public Safety; Parks and Downtown; Streets, Infrastructure and Neighborhoods; Public Art; and Finance. Over the course of this process (May-June 2023), Allen residents led the charge to select and prioritize projects to be paid for by bonds, set bond amounts and determine what impact (if any) the bond might have on the tax rate. Discussions were guided by a knowledgeable citizen committee with a history of service to the community, with presentations and supplemental information provided by City of Allen staff.

You can find relevant documents, videos, presentations and other resource files on Engage Allen, the City of Allen's official public participation platform:

• General information
• Public Safety
• Parks and Downtown
• Streets, Infrastructure and Neighborhoods
• Public Art
• Finance