Superintendent Benavidez continues to inform the public on Proposition One.
Photo by Lisa Morton
The CCAISD Board of Trustees will have Proposition One on the ballot for the May 7 Election for voters to decide on whether or not to approve a $30M bond issue for facility improvements. A major concern is how are the taxpayers going to pay for this debt if the bond issue passes.
The financial impacts are summarized on the District website http://www.ccaisd.net/district/bond2016 as follows:
• Our tax dollars stay here. Taxes for school bonds, also known as “interest and sinking” revenues, are not subject to recapture by the State unlike the percentage that the State takes from the District’s general fund. As such, 100% of the proceeds from taxes to pay off the bond would stay in CCAISD.
• Recapture Savings. By paying for $30 million in capital expenditures from proceeds of the bond issue, CCAISD will save approximately $25.7 million in recapture payments (funds that would otherwise be paid to the State for other districts).
• Estimated Tax Impact. Based on the successful passage of the bond, a homeowner would pay an estimated $9/month for a home valued at $50K to $28/month for a $100K home taking in to account the state mandated $25K homestead exemption.
• Impact on Senior Citizens’ Property Taxes. Taxpayers 65 and older will not see an increase in their school taxes for residential homestead values.
First Southwest, the financial advisors for the bond issue, prepared a Tax Rate Impact Table to show homeowners what their potential liability could be if the bond issue passes. The District has used a tax increase projection of $.45/$100 valuation to fund the bond payments over a 25-year payout projection in most of its literature.
According to the Culberson County Appraisal District (CCAD), the average taxable value of a residential property is $42,630 with 679 homes on the tax rolls (excluding mobile homes). With the state-mandated $25K homestead exemption subtracted from this value, the taxes for a homeowner will be minimal. And homeowners that are 65-years and older will not see an increase in taxes for their residential homestead providing they have filed the proper homestead exemption with the CCAD.
Where, then, are the funds to pay for this debt going to come from? The CCAD Top 20 Taxpayer report for the Tax Year 2014 reflects a taxable value of almost $395M for these 20 property owners with the highest taxable values in the County, with most of these values being attributed to the mineral rolls related to the oil and gas industries. This is almost half of the taxable value in the County. Using the assumption of $.45/$100 valuation, based on the 2014 values, the Top 20 Taxpayers will be assessed approximately $1.7M for debt service. For smaller businesses, the impact will be $2,250 of debt service taxes per each $.5M in property valuation.
With such high taxable values in the County over the last several years, CCAISD is now a Chapter 41 school which means that we are considered a “rich” school district and must share our wealth with poorer school districts through a mechanism known as “Recapture.” Figures presented by CCAISD show that in 2014-2015, approximately 2.5% or $150K of the local taxing effort for Maintenance and Operation (M&O) was sent to the state as recapture. In 2015-2016, it is projected that approximately 33% or $3.9M will be sent to the state. And this trend will continue as long as the taxable values stay high. Since debt service levies are not subject to recapture, the District estimates that it will retain $25.7M within the District over the 25-year life of the bond.
However, the CCAD has no means of projecting the taxable mineral values over the long term. So it is possible that these values could drop dramatically and bring the District back to its pre- oil and gas boom values of approximately $400M. First Southwest has taken this into account when preparing the I&S Tax Rate Projections/Calculations using a 25-year payout with a projected interest rate of 4.3% and a projected collection rate of 98%. Their projections show a declining taxable valuation over the next few years, reaching the $400M valuation in 2020 and remaining at that level for the remaining life of the bond. This decline in taxable values would be a worst-case scenario. If the taxable values continue to remain high, it is possible that the bond could be paid off earlier than projected.
The biggest concern should be, a $30 million bond increases the Districts I&S tax rate to near maximum 50 cent levels. CCACISD has a current I&S tax rate of 1-2 cents. To increase the tax rate an additional 45-50 cents for a $30MM Bond is a unnecessary gamble. Reason being, if the property values of the District decrease by just a few percentage points (which we have seen in past years) the 50 cent max will be reached BUT will NOT be sufficient to make annual bond payments. Thus, the District will have to resort to its M&O Tax Rate and General Fund to make any shortfall on payments. Maintenance and operation monies are for kids, teachers, aids, and daily operations, not for debt. There is no good reason to be flirting with this scenario. A $10-$15 million dollar bond is more than sufficient to fix the construction needs of the District, and this will not trigger a doomsday scenario for the tax payers. Looks like the larger the bond, the more money the architects make on this deal. Was a $10 million or $15 million scenario ever provided by the architects????? Or only $45 million and $30 million scenarios??? Hello!!!!!!!!!!!!!!!!!