Most of the bonds taxpayers hear about, and vote on, are general obligation bonds for cities, counties, school districts and hospital districts in which government entities borrow money to pay for public improvements like street repairs, school construction and library updates. These decisions come before taxpayers in the form of bond issues, and voters decide whether or not to foot the bill.
Revenue bonds, on the other hand, are used when government entities borrow money to pay for a project like an airport, convention center, arena, farmers market or, in the case of Downtown Dallas, a hotel. Revenue generated from that project is used to pay back the loan.
Revenue bonds also don’t require a taxpayer vote. The convention center hotel is an exception because a petition resulted in the hotel charter amendment being added to the May 9 ballot — the council approved the $500 million project and didn’t intend for taxpayers to vote on it. Also, though general obligation bonds require taxpayers to decide on a set amount divided between hundreds of public projects, no laws limit how many revenue bond projects a government entity can undertake at once. The only limit is how much money can be secured in loans.
If a revenue bond project doesn’t generate enough money to pay off the loan, the government could let the bonds go into default and refuse to pay back the rest of the money. This isn’t to its advantage, however; it’s similar to an individual filing for bankruptcy — dodging the debt would severely impair its credit rating and inhibit its ability to do other bond projects in the future.
That’s why the city has built in a $50 million fund (part of the overall project financing) to cover potential operating losses at the hotel, and that’s why Dallas taxpayers would likely be on the hook for losses beyond $50 million — the city would likely choose to subsidize any loss with funds from the general budget, whether that means raising taxes or decreasing other public services.
Mayor Tom Leppert, a major supporter of the hotel project, has repeatedly assured the council and voters that won’t happen here.