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Over the past 26 years, state Sen. Rodney Ellis, D-Houston, has voted to confirm gubernatorial appointments to the Lower Colorado River Authority, a powerful electric utility in central Texas.
During the same time, financial firms he either owned, worked for, or owned stock in have profited handsomely by helping underwrite $3.7 billion in bonds sold by the authority.
His impressive legislative record is well-known — 676 bills he has authored or served as the lead Senate sponsor have become law, including major reforms to Texas’ criminal justice system, schools and community colleges.
But because of Texas’ lax ethics law, much less is known about Ellis’ equally impressive career in the lucrative government bond business, which has repeatedly placed him in a position to exercise authority over local governments and public agencies whose bond proceeds were being used to pay Ellis’ firms.
His dual role as lawmaker and bond underwriter has left him straddling the line between politics, municipal finance and public policy, raising questions about potential or actual conflicts of interest, or the appearance of conflicts.
Since first being elected to the Texas Senate in 1990, Ellis has been involved directly or indirectly in municipal bond deals totaling $120 billion in Texas, an analysis by the Houston Chronicle has found. Nearly all of those deals have involved several firms doing “underwriting” — when firms are chosen or bid to buy bonds from a government agency and then sell them to investors.
The cost of issuing government bonds is about 1 percent of the bond’s principal amount, or $1 million for every $100 million in bonds sold. About half that issuance cost, or $500,000, would go to underwriters’ fees, according to Public Sector Credit Solutions, a California-based research firm which examined 800 bond deals nationwide since 2012.
