Regional News

More Texas Schools Seek Tax-Rate Hikes

DALLAS - When the Texas Legislature in 2006 passed a law mandating that school districts roll back property taxes, the act was hailed as one of the largest tax breaks in state history.

But pressured by rising costs, many school districts are asking voters to allow them to add back the maximum amount of "golden pennies" allowable under the law to fund much-needed maintenance and pay raises for teachers.

The rush to the polls for relief from the lowered maintenance and operation rates comes as voters in Texas also are being asked to approve hefty bond issues for capital improvements to cope with rapid growth. Some school officials are concerned voters could be less willing to vote in favor of new bonds when they are being asked to pay higher taxes to maintain basic services.

The legislation - HB1 - mandated districts lower their maintenance and operation property tax rate from a maximum of $1.50 per $100 of assessed value to $1.33 for the 2006-07 school year and then to $1 per $100 last year. The state promised to make up for the lost revenue. School administrators have the discretion to boost the rate to $1.04, but need to get voters to approve a increase to a maximum of $1.17.

Last week, trustees of two south Dallas suburban districts decided to put a referendum before the electorate this fall to increase their tax rate by $0.13 to $1.17 per $100 of assessed value. Another district outside San Antonio is considering the same, while officials at Northside Independent School District plan to add back the four cents allowable without voter approval.

Fitch Ratings analysts said when the bill was passed that "this restriction could limit a district's ability to generate necessary funding for operations, potentially leading to program cuts and/or costly elections."

More than 90% of the state's roughly 1,030 school districts immediately raised their rate to $1.04 per $100 of assessed value in the fall of 2006, according to Dick Lavine of the Austin-based Center for Public Policy Priorities.

Lavine said another nearly 100 districts received voter approval last year to raise the rate by the additional $0.13 to $1.17 per $100 of assessed value. He also said another roughly 100 districts may seek approval in the coming months to raise rates higher than $1.04 per $100.

Cedar Hill Independent School District wants to increase its rate to $1.17 per $100.

Mike McSwain, chief financial officer of the southwest Dallas County district, said: "It looks like [HB1] is working like they intended," as many districts already added back the four cents and now are going to voters for more funding.

"It's just real hard to make a cap at '05-'06 rates and not leave any room for inflationary pressures," McSwain said. "It's made it impossible to operate under that cap, so we have no choice but to seek the increase."

District voters will weigh in on the rate hike Oct. 7. McSwain said the timing is tight, but officials feel calling for an off-date election may result in a more informed electorate than if the vote is held in conjunction with the general elections in November.

McSwain said the district may put a bond package of about $125 million to $130 million before voters next May, mostly to pay for deferred maintenance that has arisen, in part, from a lack of adequate funds due to the lowered tax rate.

Ahead of a refunding sale in May 2007, Standard & Poor's raised its rating on the district to A from A-minus due to continued strengthening of finances and "projected maintenance of higher reserves."

Analysts said the district's assessed value averaged 12% annual growth the past five years to $2.6 billion for fiscal 2007 from $1.5 billion in 2002. Officials also managed to increase the unreserved general fund balance to $10.6 million for fiscal 2006 from a deficit five years earlier, according to analysts. Fitch rates the district's credit at A-minus.

A little closer to downtown Dallas, Duncanville Independent School District also wants to increase the property-tax rate it levies to $1.17 per $100. The vote will also be held Oct. 7.

Spokeswoman Tammy Kuykendall said the primary reason for a tax increase is to give teachers and staff a raise.

She said the current budget is balanced and officials have made annual cuts to keep a high level of service for the students and minimize the impact of changes in the tax rate. But teachers haven't received a pay raise in a few years, and officials "felt it prudent to try and implement one sooner rather than later."

"There still a disparity with the state's school funding formula," Kuykendall said. "We're capped at our '05 rate, which is one of the lowest for a school district in the state, and we have just $4,678 available per student. The only way to receive more funding is to have enrollment gains and we've leveled off at about 12,300-12,500 students."

The district cut about 50 staff positions two years ago, saving about $2.2 million. Another five teaching posts and five central-administrative positions were cut this year, saving another $400,000, according to Kuykendall.

"We're at a point where the next level deeper we go will lead to cost aversions that impact educational resources," she said.

The district carries underlying ratings of A-plus from Standard & Poor'sand A2 from Moody's Investors Service.

Meanwhile near San Antonio, the administration of the Harlandale Independent School District wants to boost the rate to $1.17 per $100, estimating the change would generate $8.2 million.

Trustees meet Monday to decide on a possible election that would be held in November.

Some officials foresee substantial cuts, including closing one elementary school and one middle school, if voters reject the increase.

The district carries underlying ratings of A-minus from Standard & Poor's and A3 from Moody's.

Northside ISD officials plan to add back the four pennies that don't need voter approval.

Superintendent John Folks said the additional $25 million of revenue will help pay for salary raises for teachers and costs related to enrollment growth and inflation.

"The state has made no provisions for inflation, the increase in the cost of fuel and utilities, salary raises, or the many unfunded mandates passed by the Legislature," Folks said.

The board will hold a hearing regarding the tax rate and upcoming budget later this month.

With an enrollment of nearly 85,600, Northside is the fourth-largest in the state and adds about 4,000 students a year. Officials project the enrollment to top 100,000 within five years. Since 2004, the school district has added almost 11,000 students, built 11 new schools, and renovated numerous facilities.

In May, voters approved one of the largest bond elections ever by a Texas school district - nearly $693 million for a dozen new campuses. The district carries underlying ratings of AA-minus from both Fitch and Standard & Poor's and Aa2 from Moody's on its more than $1 billion of debt outstanding.

"HB1 has changed the funding system to where we're squeezing every penny from our property tax as we get less state funding," said Jon Graswich, chief financial officer of Northwest Independent School District in suburban Fort Worth. "And we've got a lot of people out there with a lot of pressure on their homes."



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