If you come, they will build it.
Last year, Texas once again welcomed more new residents than any other state, adding nearly 563,000 in 2024, according to the Census Bureau, to push the Lone Star State’s population to more than 31 million.
As people continue migrating to Texas, municipalities continue bonding and building to satisfy the infrastructure needs of all these new inhabitants.
About $68 billion of municipal bonds were sold in Texas last year via almost 1,400 issues, according to data from LSEG published by The Bond Buyer. In 2023, $66.41 billion of municipal bonds were sold by Texas issuers in 1,569 transactions, compared with $52.44 billion and 1,622 issues the year prior.
McCall Parkhurst & Horton remains the top bond counsel firm in Texas, advising on 372 bond issues in 2024 valued at more than $25 billion, according to The Bond Buyer. The Dallas-based firm is dedicated to public finance and has been instrumental in helping Texas municipalities manage growth for almost 100 years.
Mark Malveaux, managing partner at McCall, attributed 2024’s numbers being similar to 2023’s because of the continued population growth, fairly decent economics, and still increasing demand for infrastructure.
“Last year, Texas was a very active market once again, continuing a trend since COVID where we’re seeing a huge demand for infrastructure — schools, hospitals and roads — as people continuing to move to Texas suburbs and exurbs, wanting high-quality schools and high-quality utilities,” Malveaux said.
Houston-based Bracewell served as bond counsel on 133 issues in Texas in 2024 valued at $9.7 billion, and Norton Rose Fulbright was bond counsel on 167 deals in Texas valued at $8.98 billion last year, The Bond Buyer reported.
Per Usual, Water, Transportation Infrastructure Reign
In the fall of 2024, the Texas Water Development Board priced another $1.6 billion of State Water Implementation Revenue Fund for Texas revenue bonds. Proceeds from these SWIRFT sales are used solely for water projects identified in the state’s 2022 water plan that projects the Texas population to exceed 51 million in 2070.
“When investors purchase TWDB bonds, they can be confident that local entities will use those proceeds for planning, acquisition, design, or construction costs associated with important water infrastructure projects,” Chief Financial Officer Rebecca Trevino said when the bonds came to market last fall.
The program funds long-distance water pipelines, reservoirs, agricultural canal-lining, aquifer storage and recovery, and seawater desalination projects in Texas.
At the TWDB’s Water for Texas Conference in Austin in late January, state demographer Lloyd Potter provided the keynote address and stressed the importance of municipalities investing in infrastructure to keep pace with growth.
Rick Witte, a partner in Jackson Walker’s Houston office, said his team did a lot of work in 2024 with Texas Public Improvement Districts and Municipal Utility Districts as residential subdivisions continue being built around Houston, Dallas, Austin and elsewhere.
Witte said a number of cities in Texas — even if they have water rights secured — are continuing to build infrastructure to ensure the water gets to the city or municipality. He anticipates more of these development finance projects coming to market in 2025.
One of the largest drivers of population growth in North Texas over the past 50-plus years is DFW Airport, which opened in January 1974, when about 12.3 million lived in Texas.
Malveaux has acted as bond counsel on more than a few billion dollar deals that have ensured DFW airport maintains its role as a global transportation hub.
In November, McCall Parkhurst and Horton was bond counsel for the airport’s $1.32 billion financing that The Bond Buyer honored as the Deal of the Year in the Southwest because it introduced an innovative extended commercial paper program that may become a blueprint for large-scale airport financings, according to the publication.
In late 2024 (and again in early January), Houston sold $1.1 billion special facilities revenue bonds backed by United Airlines for renovations to Terminal B and Terminal C at George Bush Intercontinental Airport, which opened 55 years ago about 20 miles north of downtown. Houston’s population has nearly doubled since 1970 to more than 2.3 million. The nation’s fourth-largest city issued $2.7 billion of debt in 2024.
San Antonio, which is now the seventh-largest city in the country — home to more than 1.5 million residents —issued about $2.67 billion of debt in 2024, including $1.1 billion of electric and gas revenue bonds last summer as part of its $6.2 billion capital plan over the next five years to modernize the Alamo City’s aging infrastructure.
Districts Face Funding Dilemma
While there are plenty of Texas school districts putting bond packages on the May ballot, voters in Houston ISD rejected a $4.4 billion bond package in November, and more than a few school districts saw propositions for new facilities or upgrades to existing athletic and fine arts facilities rejected by voters last fall.
Witte said Houston ISD remains active in the muni market, bringing multiple refunding bond issues to market in 2024 and again in February.
“All school districts in Texas right now are having a hard time paying for the upkeep on their facilities, so they are refunding bonds to create savings on the debt-service side, while also trying to be more efficient on the maintenance and operations side,” Witte said. “It would be nice if the schools got some more funding from the Texas Legislature, but [school funding] has become so very political the last few years.”
Gov. Greg Abbott’s proposed school choice plan, which would create a voucher-like program that allows parents to use public funds for private schools, was passed by the Texas Senate in February and awaits its fate in the House.
Standard & Poor’s Global Ratings lowered its outlook on Houston ISD’s debt to negative from stable ahead of the most recent refunding due in part to “a challenging state aid environment, and a decrease in federal funding further pressured by a rise in expenditures as the Texas Education Agency takeover implements educational improvements districtwide, resulting in higher salaries and start-up costs for a new instructional foundation program.”
S&P analysts said the revision to a negative outlook also “reflects budgetary challenges due to lower revenue as a result of significant and continued enrollment declines.” S&P affirmed its AA-plus underlying rating on Houston ISD’s existing general obligation debt and maintenance tax notes and its AA rating on the district’s lease revenue debt.
The voucher issue may be decided before Texans head to the polls in May when school districts across the Lone Star State are putting bond propositions on the ballot to fund construction of new facilities to deal with enrollment growth while also upgrading existing campuses.
Malveaux has worked at McCall for 30 years and recalls going to a Frisco ISD meeting that was held in a double-wide trailer. In 1990, about 6,500 people lived in Frisco. The population ballooned to more than 35,000 at the turn of the century, and now more than 225,000 live there.
While Frisco may’ve been the destination for many over the past 25 years, voters in Frisco ISD rejected $1 billion of new bonds in November that would’ve upgraded 20 aging campuses.
The new hot spots north of Dallas are once-small towns that are transforming into bustling exurbs with rapidly growing populations and the consequent infrastructure needs.
The town of Melissa is only about five miles north of Frisco and had roughly 1,500 residents in 2000. It’s now home to more than 23,000 people.
Melissa ISD is putting an $875 million bond package on the May ballot to build three to five new elementary schools, another middle school, an early childcare campus and a ninth-grade center, among other expansions, because demographers project the student population to more than double to nearly 13,000 by 2034. The school district is about 40 miles north of downtown Dallas and currently serves about 5,700 students for the 2024-25 school year.
Witte said most Texas school districts do a good job canvassing voters and convening bond committees ahead of time to assess needs and lay the groundwork for bond elections to pass. But, of course, anything can happen at the ballot box.
Witte said as a taxpayer and parent, he has a lot of faith in the administration of Spring Branch ISD, where his children attend high school, though he understands that facilities — like those at many school districts across the state — wear out fast because administrators do not have the funds to keep pace with maintenance.
While voters in Houston, Frisco and at least 18 other school districts rejected bond propositions in November, there are plenty of Texas school districts putting bond packages before voters on the May ballot. Just west of downtown Houston, Spring Branch ISD has $631.4 million on the ballot.
Tomball ISD, just north of Houston, has $429 million worth of bonds on the May ballot, and Dripping Springs ISD, which is a growing Austin suburban district, has a $402.3 million bond package on the ballot. Tiny Springtown ISD seeks voter approval for a $98 million bond referendum to build a new elementary school, upgrade existing campuses, acquire more buses and update safety and security.
Springtown ISD is about 30 miles northwest of downtown Fort Worth and has added nearly 600 students over the last four years, with another 400 students expected in the next four years. That is equivalent to about one and a half elementary schools, according to the school district.
Springtown ISD officials project the school district is going to be 135 seats short of what it needs without any new construction or expansion. Two elementary schools are over capacity and the intermediate school will be over its capacity within the next year.
“Others have realized what a great community Springtown is to live in and make their home,” Superintendent Shane Strickland said in a news release after the board approved calling the bond election in early February. “But the fact is that we are running out of room faster than we can act on right now. We have had to request waivers from the state for our overgrown classroom sizes in several areas. This bond package helps accommodate that growth at the elementary level and our career and technical education at the middle school.”