Texas municipal bond volume climbs in 2024 to $67.88 billion

A deal backed by United Airlines to finance upgrades at Houston’s George Bush Intercontinental Airport was one of many billion-dollar-plus deals in Texas in 2024.

Houston Airport System

In a record year for municipal bond issuance, Texas set a record of its own.

Issuers in Texas sold $67.88 billion of bonds in 2024, according to LSEG data, up 15% from 2023’s $59 billion, which made it that year’s biggest volume state for the first time since 1981.

The Lone Star State’s bond barrage in nearly 1,400 deals comes with the national municipal bond market volume on track to beat its 2020 record year of issuance, though California will claim the top spot among states, according to LSEG data.

Texas issuers brought several $1 billion-plus deals to market, including Houston’s $1.1 billion of special facilities revenue bonds backed by junk-rated United Airlines to fund terminal projects at George Bush Intercontinental Airport, North Texas Tollway Authority’s $1.135 billion of first and second tier revenue bonds, a $1.56 billion Texas Water Development Board bond sale, and nearly $1.1 billion of San Antonio electric and gas systems revenue bonds.

In addition to a $1.633 billion Central Texas Turnpike System July bond sale, the Texas Transportation Commission had three other issuances in 2024: $840.26 million of general obligation mobility fund refunding bonds, $696.24 million of highway improvement GO refunding bonds, and $346.8 million of state highway fund first tier revenue refunding bonds.

The commission this year terminated a public-private partnership that built four toll lanes on State Highway 288 in Harris County with the expectation future toll revenue bonds will cover the $1.7 billion buyout cost.

A $723.5 million Dallas Fort Worth International Airport revenue bond sale in August was selected as the Southwest region winner in The Bond Buyer’s 2024 Deal of the Year Awards.

Triple-A-rated Texas ended fiscal 2024 on Aug. 31 with $73 billion of outstanding debt, consisting of $16.6 billion of general obligation and $56.4 billion of revenue bonds, while issuance by state entities totaled $8.34 billion, according to Texas Bond Review Board data.

As of Aug. 31, 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, said the board’s fiscal 2024 report, released this month.

Outstanding debt was at 0.92%, while authorized but unissued debt was at 0.78% for a total of 1.70% down from 1.95% in fiscal 2023.

The weighted average of issuance costs for state bond issuers fell to $5.28 per $1,000 bonds in fiscal 2024 from $5.69 in fiscal 2023, according to the report. The weighted average underwriting spread of $3.64 per 1,000 bonds, which the report said was lower than national averages, accounted for 69% of issuance costs.

The board said state issuers expect to issue approximately $10.59 billion of debt in fiscal 2025.

Hefty budget balances have allowed the state to skip annual cash flow borrowings in recent years. Texas last sold tax and revenue anticipation notes totaling $7.2 billion in 2020.

Texas public school districts piled on debt after voters approved billions of dollars of GO 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 killing of 19 elementary students and two teachers in Uvalde, Texas.

In May 2024 bond elections, voters okayed $7.61 billion or 74.7% of the $10.18 billion of bonds schools placed on ballots. Voters rejected some hefty school bond proposals on Nov. 5 ballots, including Houston Independent School District’s $4.4 billion of bonds in two parts.

Texas schools, which sold $17.54 billion of GO bonds during the state’s fiscal 2024, had $130.2 billion of outstanding debt, the most among local government issuers, according to bond review board data. Texas city issuance totaled $14.13 billion with $101.8 billion of outstanding debt, while counties sold $3.74 billion of debt and had $18.77 billion of debt outstanding. https://data.brb.texas.gov/local/

In 2025, Dallas expects to begin tapping $1.25 billion of bonds voters approved in May for infrastructure projects.

Austin’s plans to begin bond financing for a multi-billion-dollar light-rail project its voters agreed in 2020 to fund with a maintenance and operations property tax hike remain in limbo as legal challenges continue.

A state judge this month dismissed a lawsuit seeking to cut off the project’s property tax funding, while the Texas Attorney General’s Office asked the state Supreme Court to settle a jurisdictional dispute affecting litigation over the city’s ability to seek court validation for an initial $150 million of revenue bonds.

Entities that finance water-related projects and in some cases other infrastructure like roads and parks, issued $3.83 billion of tax-supported and nearly $3.15 billion of revenue-supported debt, bond review board data showed. Outstanding debt for municipal utility and other districts and authorities totaled $50.2 billion.

Voters in November rejected only $65.42 million of the $23.87 billion of bonds requested by local water districts, including MUDs, according to bond review board data.

The only registered voter in Wise County’s Rolling V Ranch Water Control and Improvement District authorized $1.425 billion of bonds for water, sewer, drainage, and road infrastructure and debt refinancing.

Issuers continue to contend with 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 have been the target of academic, business group, and energy industry studies.

The constitutionality of Texas’ fossil fuel boycott law is being challenged by a business group, which filed a lawsuit in federal court in August against Texas Attorney General Ken Paxton and state Comptroller Glenn Hegar, who have asked the judge to dismiss the case.

Wells Fargo has escaped bans under both laws, most recently with Paxton ending a 14-month review of the bank after it withdrew its membership in the Net-Zero Banking Alliance.

The review, launched in October 2023, also included Bank of America, JP Morgan, Morgan Stanley, and RBC Capital Markets.

Wells Fargo evaded an underwriting ban in August 2023 when Paxton’s office announced it was not able to determine if the bank had a policy or practice that discriminates against a firearm entity or firearm trade association.