DALLAS -- The Harris County <

Improvement District No. 1, a special district that encompasses the upscale Galleria shopping area of Houston, plans to sell up to $125 million of general obligation bonds for various projects.

But whether the district can issue <

the debt is in the hands of a majority of an estimated 20 registered voters, none of whom owns property or directly pays property taxes in the 325-acre district.

Saturday's referendum asks voters <

to approve an estimated $6.25 million of debt for every eligible voter. But officials believe the bonds will be authorized.

"I'm fairly comfortable with the <

outcome of this," said Bob Randolph, general counsel to the district and a bond lawyer at Vinson & Elkins in Houston. "This is basically a commercial and business district. Not many people live in it."

Still, state law requires that a <

majority of voters who turn out on Saturday authorize the sale of the unlimited tax debt. District officials believe that the bond sale, supported by property owners, will be approved by residents who live in the area but would not be directly affected by pledging higher taxes to pay debt service.

The district apparently is the first <

of three in Texas, all in Houston, to seek voter approval to sell bonds for improvements. The improvements planned by the Harris County district range from decreasing traffic problems to ornamental changes that include new lighting, archways, and specialized street signs that reflect the area's chic image.

Eugene B. Shepherd, managing <

director at Legg Mason Wood Walker Inc. in Houston, the district's financial adviser, said that if voters approve, as much as $10 million of debt will be sold within 90 days for projects.

As for the remainder of the authorization, <

he said no specific plans have been made, adding, "I doubt they'll spend the full $125 million."

When the debt is sold, Mr. Shepherd <

expects it to carry a triple-A rating because of bond insurance. Normally, districts that have never sold bonds cannot obtain insurance and often must sell without a rating.

However, the district is not typical <

because its hotels, shopping center, and other commercial property have an established tax base of $1.4 billion to back the debt. The district was created by the Texas Legislature in 1987.

Property owners now pay an estimated <

10-cent per $100 of assessed valuation levy to fund small, pay-as-you-go projects in the district and other operating expenses.

Two other commercial areas of <

the city are also part of similar districts, but neither has sold any debt so far.

"As far as I know, this is the first <

improvement district in the Houston area to even hold an election," Mr. Shepherd said. "I think that as time goes on, we are going to see more of this."

The reason: Such areas can finance <

specialized improvements that other taxing districts, such as the city or county, would not support.

The improvement districts are <

unique in Texas because they are a hybrid of other kinds of special district financings. Most districts can finance only one kind of project, but this new district is part-road district, part-municipal utility district and virtually unlimited in the kinds of improvements it can pay for.

One of the other improvement <

districts was formed in the area that includes Houston's Greenspoint Mall. Though the district has no specific capital plan, officials say it has used annual tax assessments to help finance greater police and security patrols to address crime concerns in the area.


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