Texas wins 2023 muni bond issuance rodeo for first time in 42 years
4 min readWith 2023 municipal bond issuance of $59 billion, Texas wrested the title of top volume state from long-time debt behemoths New York and California.
The debt, which was sold by Texas state agencies, cities, counties, schools, and others, and accounted for 15.5% of nationwide issuance, lifted the Lone Star State to the number one ranking for the first time since 1981, when issuers raised $2.9 billion, according to LSEG data.
In 2022, Texas bond volume of $47.66 billion
Texas public school districts also piled on debt after voters approved billions of dollars of general obligation bonds in recent years for new or expanded facilities to accommodate growing enrollment, technology improvements, renovations, and enhanced safety measures, particularly in the aftermath of the May 2022
Outstanding Texas public school debt climbed 36.6% since 2019, topping $120 billion in 2023 and accounting for 38.8% of all outstanding local debt, according to the state Bond Review Board’s
Austin Independent School District tapped into a record $2.44 billion in bond authorization passed by voters in November 2022 with a $542 million January deal despite not having triple-A backing from the Texas Permanent School Fund’s bond guarantee program.
Dwindling capacity in the program under a federally imposed limit
Action taken by the Internal Revenue Service in May to greatly boost the program’s cap made the guarantee
More school debt is coming. Texas voters passed about $15.22 billion of the $18.1 billion of school bond propositions
In its annual report, the board
The weighted average of issuance costs for state bond issuers rose in fiscal 2023 to $5.69 per $1,000 from $5.53 per $1,000 in fiscal 2022, the report said.
The state remained below its constitutional debt limit, which prohibits annual debt service paid from general revenue from exceeding 5% of the average annual unrestricted general fund revenue for the previous three fiscal years.
Outstanding debt was at 0.99%, while authorized but unissued debt was at 0.96% for a total of 1.95%, down from 2.25% in fiscal 2022, the report said.
Hefty budget balances, including $48.4 billion at the end of fiscal 2023, have allowed the state to skip annual cash flow borrowings in recent years. Texas last sold
Blockbuster issuance is happening in the shadow of two 2021 Texas laws prohibiting state and local government contracts with companies, including municipal bond underwriters, that “boycott” or “discriminate” against the fossil fuel or firearm industries.
The laws led to diminished activity or outright bans for some big investment banks. UBS and Citigroup were barred for flunking the state’s litmus tests
As a result, both banks were removed as co-managers from the natural gas securitization deal. UBS subsequently made
In August, Wells Fargo eluded a ban after Texas Attorney General Ken Paxton’s office said it was
Paxton’s office
The potential for even more big banks being banned from Texas deals raised concerns that less competition
As part of the attorney general’s crackdown, investment banks were