The Texas Public Policy Foundation recently highlighted Frisco ISD’s bond proposal, set to appear on May’s local ballot. The brief paper is appropriately titled, “A Profile in Runaway Debt: Frisco ISD’s $775 Million Bond Proposal”.
Not only did their analysis astonish, but it noted a cost taxpayers often overlook…interest expense.
First, let’s review the highlights. The astronomic debt burden currently imposed stands at $2.6 billion, or $56,000 per student. That’s $14,300 higher than the next most indebted district, Denton ISD.
To put those figures in perspective, the average amount of debt per student in 2012, for the 854 districts in Texas with debt, was $13,500 (excluding interest). If the 2014 proposition passes, Frisco ISD’s new debt burden could be twice that of surrounding districts at today’s enrollment figures, or over $84,000 a student, when interest expenses are included. If enrollment grows as projected, adding 14,000 new students, that number will still approach $65-70,000 per student.
Although voters will only see the principal amount of $775mil on their ballot, the actual price tag for taxpayers could exceed $1.3 billion, depending on how quickly the debt is retired. After all, taxpayers are concerned with the total cost of repaying the debt, not just the principal that will finance new buildings, technology, equipment and vehicles.
The State Comptroller and her staff have done an admirable job highlighting this information gap, not only by educating the public through research, but by sponsoring legislation like HB14 which was designed to make basic financial data more accessible to the public.
Unfortunately, local officials lobbied Democrats and Republicans to join hands in a bi-partisan effort to kill the transparency legislation.
To be clear, there is no doubt that Frisco ISD needs to build new schools…
After all, it’s the fastest growing district in the state. But voters need to ask themselves, how many facilities are actually needed, how prudently are they being constructed, and how much debt needs to be approved on a single proposition this year?
The district estimates that the 2014 proposal will accommodate enrollment growth through 2020, assuming they are accurate. But even if you assume the amount is appropriate, the district could issue the same debt in smaller amounts over a longer period of time, allowing the public to more easily scrutinize the fiscal necessity and use of additional debt.
In fact, before the board approved this proposal, the volunteer bond committee was given five different drafts to consider, each ranging in cost between $524-888 million. They just so happened to choose the second most expensive option.
What’s even more concerning is that the district is planning to spend anywhere between 25%-57% more on schools of the same size when compared to one’s its previously built. When a local tea party group inquired regarding the discrepancy, the board was unable to provide a clear explanation for the increase.
Voters should know that districts are not legally limited on how they spend the bond proceeds, once approved. Stated differently, there is no guarantee that debt authorized by voters will be spent on what the district promised prior to its passage.
For example, the board used $27 million from the 2006 proposition to build an administration building, commonly referred to by some as the “Taj Mahal”, which was not included in the proposal sold to voters. Based on construction expenditures provided by the district for past projects, $27 million could have built two new elementary schools.
Taxpayers deserve answers…before approving another bond.
Frisco ISD is already on trajectory to hit the I&S tax rate limit of $0.50 per $100 of valuation, which is statutorily defined by the legislature. Without the ability to raise rates, it could prevent them from issuing any debt to accommodate future needs.
And if Frisco’s growth slows, the revenue collected from the I&S rate won’t be high enough to cover the district’s annual debt service.
We’ll continue to post updates that explore a more detailed analysis of the proposal….stay tuned.