Bexar County leaders are considering a potential moratorium on issuing new debt for the next 18 to 24 months in an effort to protect the county’s AAA bond rating.
The county’s roughly $2.5 billion in outstanding debt means it has the highest debt per capita among Texas counties — something County Manager David Smith said ratings agencies have recently started caring more about, despite otherwise favorable ratings factors.
“For an abnormally long period of time interest rates have been very low, so in a sense, it made sense to borrow,” Smith told commissioners at Tuesday’s work session. “We took advantage of it while it was low, and I think future courts will look back and say that was wise.”
In November of 2022, however, Moody’s Ratings alerted Bexar County that it was one of 345 municipalities with their status under review. Standard and Poor’s Rating Service listed the county’s “high debt burden with continued issuances anticipated” as a potential liability, according to the county.
A ratings downgrade could cost millions of dollars in additional interest on future debt, according to Smith’s presentation. But for every year the county doesn’t add to existing debt, it would pay down about $100 million, shoring up its financial position.
“I’m not saying, ‘Don’t do future projects,'” Smith told commissioners. ‘I’m just suggesting, let’s concentrate on spending the money we’ve already issued for projects you’ve approved that haven’t been completed.”
The court’s four Democrats and one Republican sounded generally supportive of his proposal Tuesday.
But they asked Smith to come back with a list of planned projects that would be affected — paving the way for some long-simmering spending disagreements to come to a head later this year.
“We’re going to take a hard look at the capital projects that are on the books,” Bexar County Judge Peter Sakai said in an interview after the meeting. “We need to reevaluate everything.”
The county is about halfway through the $620 million capital plan that a previous court approved with its 2021-2022 budget. Commissioners through the years have added another $172 million in capital projects since then, according to Smith.
The idea of pausing that list drew some skepticism from Commissioner Tommy Calvert (Pct. 4), who has been fighting to get the ball rolling on two high-profile projects in his precinct, and who framed the capital projects as a critical tool for the county to expand its tax base.
Calvert’s been pushing for the county to set aside the money for an advanced manufacturing training facility that’s now being reevaluated due to its ballooning price tag after county staff put it on the back burner.
He’s also championing The Link, a roughly $120 million economic development project that would connect San Pedro Creek Culture Park to the Riverwalk, and only recently had its feasibility study completed.
“In lieu of not doing new additional capital improvement projects, does this mean that your budget is incorporating the [project cost] increases just because of natural inflation?” Calvert asked Smith.
Smith replied that “nothing is coming in as budgeted” right now, and his office will indeed have to model the rising project costs in its debt management plan.
In an interview after the meeting, however, Sakai went much further, saying the court owes it to taxpayers to review and cull the county’s list of outstanding projects.
“We need to determine the viability of those projects and to determine what additional costs, if any, are needed,” he said. “I think it also needs to be balanced with, ‘What are the current urgent needs of the community?'”
That discussion comes as Sakai has slowly started revealing some of his own spending priorities in recent months.
He’s optimistic that the county will help fund an Advanced Rapid Transit bus route running from the West side to the Frost Bank Center, and he recently indicated it could also chip in for a new minor league baseball stadium.
“We certainly have had lots of discussions — or we hear about in the news — all the potential big-ticket projects in the coming years,” said Commissioner Grant Moody (Pct. 3), who pointed to additional capacity at the Bexar County Jail as another impending capital need.
“If we’re going to be able to step in in a crisis situation, or be able to help with significant economic development projects, then we need to make sure we have that breathing room,” he said.
Correction: An earlier version of this story misstated the date that Moody’s Ratings put Bexar County under review.
