Finance Questions and Answers about the 2017 Bond
What will the tax rate impact be for individual taxpayers?
Austin ISD does not anticipate an increase in the tax rate for our taxpayers. This is based on assumptions used by district staff, which include anticipated increases in taxable assessed values, staggered issuances of bonds, and prevailing interest rates, as well as the district's conservative fiscal management practices, which are explained in more detail in the following questions.
For taxpayers who are 65 years of age or older, it is important to know there will not be an increase in your taxes because taxes are frozen on homes of those 65 years of age and older who have filed the homestead tax ceiling paperwork with Travis County.
More information about the tax ceiling on homesteads: The homestead tax ceiling is a limit on the amount of school taxes you must pay on your residence. When you qualify your home for an Over-65 Homestead Exemption, the school taxes on that home will not increase as long as the exemption is in place. The tax ceiling freezes your school taxes at the amount you pay in the year that you qualify for the exemption. Learn more about the exemption on Travis County’s website. Learn more about the exemption on Travis County’s website.
How is it possible to issue bonds without a tax rate increase?
AISD can request additional bond authorization without a projected increase in tax rates based on assumptions used by district staff, which include anticipated increases in taxable assessed values, staggered issuances of bonds, and prevailing interest rates, as well as conservative financial management by the AISD Board of Trustees. This is a result of paying off existing debts, refinancing for better rates and rapid tax base growth. Based on the retirement of debt and the projected tax base growth, the district expects to have sufficient capacity to issue additional bonds without increasing the current tax rate.
In addition, the principal amount of outstanding debt will decline by nearly 60 percent over the next 10 years. The financing plan is to sell these new bonds over the next five years in a way that takes advantage of those declining payments and therefore doesn’t increase the tax rate.
The district uses several market assumptions to forecast the effects of taking on more debt. While these assumptions could change, the district intends to manage its debt so that the tax rate doesn’t increase, barring any significant declines in the market. For example, the administration conservatively estimated that the Interest and Sinking (I&S) tax rate to implement the 2013 Bond Program would increase by more than 3 cents. However, as a result of several factors—an increase in property values, paying off and refinancing existing debt, and lower interest rates than anticipated—the tax rate was reduced by approximately 5 cents between the 2014 and 2017 fiscal years.
So does this mean that I won’t have an increase in my tax bill?
No. Just because the school district’s tax rate will remain unchanged does not mean that homeowners will not see a higher tax bill. Actual taxes paid depend on the appraised value of taxable property, which is determined by the appraisal district, not AISD. An increase or decrease in taxable property value, even with no change in the tax rate, would result in an increase or decrease in the actual amount of taxes paid. However, as mentioned above, this does not apply to those 65 years of age or older who qualify for Travis County’s Over-65 Homestead Exemption.
AISD makes up just one portion of the local tax rate. Also included are the city of Austin, Travis County, Austin Community College District and the Travis County Health Care District. The rates for each entity are set annually by the elected or governing officials. The rate for each of the taxing entities is then applied to your home value.
Increases in property values benefit other taxing entities, but because of “Robin Hood,” AISD sees very little operating budget benefit from rising property values. Public schools do benefit, however, on the debt service side of the tax rate.
Would tax rates decrease without the bond?
No. Since the district is still paying off existing debt with the current debt service levy, the tax rate is not expected to decrease for several years.
Will this election be affected by the "Robin Hood" state school finance plan?
Debt service dollars are not subject to Robin Hood, so all tax receipts derived from the District’s debt service tax remain with the district.
How has the district managed its financial resources in the past?
All items promised in previous bonds have been delivered and/or are in progress. AISD’s use of conservative fiscal management practices and allocation of resources has producing the following results:
- The lowest overall property tax rates in the Austin area for school districts in FY2017
- Aaa debt rating from Moody’s Investors Service, AA+from Standard & Poor’s, and AA+ from Fitch Ratings, which are amongst the highest ratings a Texas public school can earn from these agencies. This has resulted in millions of dollars of savings due to lower interest rates for the district’s bond program and Austin taxpayers.
- 2016 School FIRST (Financial Integrity Rating System of Texas) rating of Superior Achievement for the 14th consecutive year
- The Texas Comptroller of Public Accounts recognized AISD with a Transparency in Traditional Finances award. Recipients provide clear and meaningful financial information not only by posting financial documents, but also through summaries, visualizations, downloadable data and other relevant information
- The district has received the Government Finance Officers Association Distinguished Budget Presentation Award for 13 years in a row and the GFOA Certificate of Achievement for Excellence in Financial Reporting for six years in a row. Austin ISD's Comprehensive Annual Financial Report has been judged each year by an impartial panel to meet high financial reporting standards. The certificate of achievement is the highest form of recognition in the area of governmental financial reporting and accounting. Its attainment represents a significant achievement by government and its management.
- The district has received the Association of School Business Officials International Meritorious Budget Award for excellence in the preparation and issuance of its school system budget for the seventh year in a row; and the Certificate of Excellence in Financial Reporting for the fifth year in a row (pending sixth-year certification).
- Top-ranked school district in the nation for total amount of renewable energy purchased for the second year in a row.
What if the bond fails?
If the bond is not approved, the district would not be able to fund the proposed projects. School buildings will continue to age, and some schools would become more overcrowded while the costs for repair and construction would increase. The district would only be able to pay for emergency repairs with remaining 2013 bond contingency funds, which would likely be depleted after a year. After that, the district would have to use its operating budget to address emergency needs. Since the district has a shortfall in its operating budget, it would be unable to cover the costly repairs for aging facilities. As such, if the bond doesn’t pass, schools would still need to be considered for consolidation and/or closure, and students would attend existing schools. Further, the implementation of the 25-year FMP developed by FABPAC would be substantially delayed.