In a tactic some are calling “hide the vote,” another North Texas school district that needs voter approval for a proposed property tax rate change is holding a summer special election — just weeks before the November general election.
Keller Independent School District trustees are calling for a 13-cent increase in the district’s operating property tax rate, triggering a Tax Ratification Election (TRE) that requires voters to approve the hike. The district, which has run budget deficits for several years, plans to spend about half the added tax revenue on pay raises.
About the “Swap and Drop” TRE
In the district’s tax rate “Swap and Drop” proposal, a 13-cent increase in the maintenance and operations (M&O) tax rate is offset by a 14-cent decrease in the interest and sinking (I&S) rate used to fund debt service — dropping the total tax rate for 2018 by a penny.
Keller school board members voted June 11 to change the tax rate from $1.52 to $1.51 per $100 of assessed taxable value via the swap-and-drop plan. The 13-cent increase would raise the operations portion of the rate from $1.04 to $1.17 — the maximum allowed by state law. The debt repayment portion of the rate would be lowered to $0.34 for 2018.
Voter approval through a TRE is required for a school district to raise its operating tax rate above $1.04. School officials scheduled the tax rate election for September 8, less than two months before the uniform election date in November when voter turnout is higher and the cost to taxpayers is lower.
“It is preposterously bad public policy to spend taxpayer money to hold special elections in the dog days of summer that almost always have a low voter turnout,” says conservative State Sen. Paul Bettencourt (R–Houston), who announced last week his intent to file legislation requiring uniform elections.
“Anything that changes a tax rate has to be voted on in November,” Bettencourt told talk radio host Chris Salcedo.
State Rep. Mike Schofield (R–Katy), who expressed interest in carrying similar legislation, adds, “If you have elections that few people know about, it’s like you’re trying to avoid the voters.”
What is the impact of raising the district’s operating tax rate?
KISD trustees estimate they would collect an additional $18.6 million for their operations budget from the rate increase — approximately $535 per student. That’s net of a $4.38 million recapture payment they’ll send to Austin in the first year of the increased rate. The district is not currently subject to recapture under the state’s Chapter 41 Wealth Equalization program, commonly known as “Robin Hood.” But it will be if voters approve the TRE.
The biggest spending item contingent on voters passing the TRE is $8.2 million for across-the-board four-percent pay raises. Other expenditures dependent on the TRE’s passage include $968,000 for additional “salary adjustments” and $2 million for “safety and security” and upgrades to sports and arts facilities.
An overview of the 2018-19 budget with and without the TRE predicts that if voters reject the M&O rate increase, the district will still collect an additional $3.9 million in operating tax revenue but would run a $6.2 million deficit due to excess spending.
KISD incurred budget deficits from 2013 to 2017, spending more each year per student than it took in — even as total per-student revenue increased 18 percent over those same five years, from $9,344 to $10,986 according to the district’s financial reports. Operational revenue also increased each year.
Trustees’ adopted budget for 2018-19 assumes passage of the TRE and projects operating revenue of $292,731,172 – a 5.7-percent increase over last year’s budget. Spending is budgeted at $292,252,098 – a 12.6-percent increase. Per-student general fund (operating) spending was $7,495 in 2017-18; trustees budgeted to spend $8,406 per student in 2018-19.
The district’s five-year budget projection also relies on “increased operating efficiencies” of $4 million to $7 million to balance planned spending in future years (including 2-percent pay raises) with projected revenue.
What is the impact of lowering the district’s debt service rate?
“I see no down side to this plan,” said board president Cindy Lotton in a statement to fellow trustees. Lotton missed the June 11 vote but expressed full support for the tax swap.
Some local residents do see potential down sides, as does trustee Brad Schofield, the one dissenting board vote against the TRE.
KISD voter Fran Rhodes says she and others are concerned the district has not done enough to control spending growth in recent years, as evidenced by its years of deficit spending. They also wonder how the district can afford to lower the I&S rate by 14 cents and still meet its debt obligations into the future.
“Why have they not lowered it before now and offered taxpayers some actual relief?” asks Rhodes. “It appears to be an admission the board was artificially keeping its I&S tax rate 14 cents higher than necessary to service its annual debt service.”
For several years, the district’s I&S rate was the maximum allowed $0.50; it was lowered to $0.48 in 2016 after the district retired some debt. If voters approve the swap and drop, trustees are free to raise the debt service rate again — without voter approval. That could put KISD taxpayers on the hook for a total school tax rate of $1.67.
“Taxpayers don’t have the ability to take a vote of the family, and increase their revenue by taxing other families,” Rhodes notes. “They are forced to set priorities and live within their means. Perhaps school districts should be required to do the same?”
In its Swap and Drop FAQs, the district admits it has no plans to lower its I&S tax rate in future years to offset rising property values and help shield taxpayers from paying higher bills. Instead, KISD says it can keep the tax rate the same and rely on rising property values to ensure taxpayers pay more:
“Keller ISD’s Finance team has put together calculations using conservative estimates for future property value growth that would still allow the District to sell bonds in the amount of $100 million every three years for the next 10 years and still not need to raise the I&S rate.”
KISD taxpayers owed $1.1 billion in outstanding debt principal and interest as of 2017, according to the Texas Bond Review Board — more than $31,000 per student. KISD passed a $169.5 million bond in November 2014 with backing from a pro-bond PAC financed primarily by school construction contractors. Bond funds borrowed for capital projects increase property taxes on local residents but can’t be spent on teacher salaries or other operating expenses.
About Keller ISD
Keller ISD serves 34,600 students enrolled across 42 campuses in Keller and parts of Colleyville, Fort Worth, Haltom City, Hurst, North Richland Hills, Southlake, Watauga, and Westlake in Tarrant County.
The district employs over 4,000 people, including 2,350 teachers earning an average base pay of $57,102, according to the Texas Education Agency. Base salaries for all district employees totaled $203 million for the 2017-18 school year.
Superintendent Rick Westfall receives an annual base salary of $245,000, according to his contract for July 2017 through June 2020, plus an $800 a month car allowance, $150 a month cell phone allowance, and retirement supplements. The superintendent’s seven-member “cabinet” oversees an administrative staff of 170.
Keller ISD is one of several Metroplex-area school districts asking voters for an operating tax rate increase for 2018. All are asking for the maximum $1.17 M&O rate. Six are holding their tax rate votes on non-uniform special election dates, rather than in November.
Current Tax Rate: $1.52 per $100 of valuation
Proposed Tax Rate: $1.51 per $100 of valuation
M&O Rate Increase: 13 cents (from $1.04 to $1.17)
Additional Annual Revenue: $19 million
TRE Date: September 8 (Early voting August 22-September 4)
District Website: https://www.kellerisd.net/swapdrop