Updated: 2-10-2021 2:13 p.m.

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The City of Dumas will consider passing a new city ordinance on March 16, 2021, that would authorize the City to issue up to $9.9 million in a series of Certificates of Obligation (CO) to be used for paying contractual obligations of the city relating to infrastructure.

According to the official notice posted by City Secretary Tonya Montoya, the CO’s will be “payable from the levy of an annual ad valorem tax, within the limitations prescribed by law, upon all taxable property within the City and from a lien on and pledge of certain revenues derived by the City from the operation of the City’s utility system.”

The official notice and more details are below in the official release.

Utility work along Dumas Ave. has been ongoing for months as the city works to update utility lines ahead of a planned re-surfacing project for Highway 287/87. – Photo Credit: @McJoNews

Texas Public Policy Foundation says the following about Certificates of Obligation:

The Certificates of Obligation Act of 1971 allows some governmental entities—like cities, counties, and certain special districts—to issue debt without voter approval to fund any public project.

More specifically, certificates of obligation (COs) can be used “to fund the construction, demolition, or restoration of structures; purchase materials, supplies, equipment, machinery, buildings, land and rights of way; and pay for related professional services.” As provided for in Local Government Code 271, Subchapter C, COs are usually payable from property tax revenues or other taxable sources.

While COs provide local governments with a flexible financing option to handle unforeseen circumstances or emergency situations, they are not restricted to only that use—which has been the source of recent controversy.

Over the recent past, COs have seen a modest uptick in use. According to the Bond Review Board: “Since fiscal 2009, CO debt outstanding has increased by 25.4 percent ($2.88 billion) from $11.33 billion outstanding in fiscal 2009 to $14.21 billion outstanding at August 31, 2018. At August 31, 2018, cities accounted for 78.8 percent of the total CO debt outstanding.”

Related Links:

What are certificates of obligation (source: texaspolicy.com)