McCalpin’s Unofficial Guide to Municipal Bonds
by William "Bill" McCalpin

What a Municipal Bond is

A municipal bond is an instrument of debt issued by a municipality to provide money for specified goals. In Texas, home rule cities (as Richardson is) are allowed by the State to issue bonds.

The Richardson City Charter states that bonds can be used “for permanent public improvements or for any other legitimate municipal purpose”, but NOT “to fund any overdraft or indebtedness incurred for current expenditures of the city government or any subdivision thereof.”(Part I, Article 19.01 of the Richardson City Charter).

For a city to raise money for capital improvements by selling bonds is similar to a homeowner taking out a car loan to buy a car. Note that selling the bonds also creates a level of protection for the taxpayer – by law, the money from the bonds must be used for the purpose specified when the bonds were sold. If the city had simply increased taxes for a number of years in order to raise the sum to pay for the improvements in cash, there would be no way of preventing the city from spending that money on something else later under a new City Council.

Note that Article 19 of the City Charter has five sections that specifically address the issuance and sale of bonds by the City.

Editorial Note: McCalpin's Unofficial Guide expresses no opinion on the 2010 bond election or any bond propositions – it is purely informational for all residents. All of the information expressed in McCalpin's Unofficial Guides is purely the opinion of the author. The Richardson Echo publishes this as a service but does not endorse nor refute its contents.