Heading toward the test, probably. (Photo: Elizabeth Lavin)

Education

Why the Dallas ISD Bond Election Won’t Really Increase Property Taxes

Confusing language on the ballot claims that the DISD bond election represents a property tax increase. That's not quite true.

A commenter in Leading Off this morning asks an important question: Why do ballots claim that the Dallas ISD bond election represents a vote to increase property taxes while supporters of the bond say it will not?

The short answer is that regardless of the details of this particular bond election, the property tax language is a new blanket requirement of any school bond election that was included in the Texas school finance reform bill that passed during the last legislative session. In a video urging for the passage of the DISD bond, state Rep. Rafael Anchia says that the inclusion of the language in the bill was part of a legislative compromise that helped get the lege’s large school finance bill passed. But even so, is the language correct – is the DISD bond vote a vote to raise taxes?

Well, not really. And here’s why.

First off, let’s look at how the district plans to finance the bonds. The $3.7 billion package will be paid by the portion of the district’s tax rate that is dedicated toward capital projects—$0.2420 per every $100 of taxable value—a chunk of the overall $1.310385 per $100 rate that property owners pay toward Dallas ISD.

In putting together the bond package proposal, a district assessment identified around $6 billion in total capital improvement needs, including hundreds of millions of dollars in deferred maintenance costs. The district arrived at its $3.7 billion number because that was a debt amount that could be issued and serviced without increasing the tax rate.

In other words, Dallas ISD specifically designed its bond package so that it wouldn’t require a tax increase in order to service the bonds. So why, then, does the ballot say the bonds will increase taxes?

Well, that requires understanding a certain kind of logic that drives the thinking of some members of the Texas House. It seems some Texas legislators believe that any school bond package represents a “property tax increase” because, theoretically, if the school district did not issue the bonds it could decrease the tax rate. In other words, the DISD bond package is a property tax increase if you believe that not passing the bond will result in the district cutting the tax rate.

Follow that?

Perhaps the more accurate way of explaining this concept to voters would be to say that “passing the DISD bond will make it more difficult to lower taxes at some imaginary point down the road.” However, given the massive backlog of deferred maintenance at the district, the likelihood that not passing the bond will lead to a tax reduction is very low. Bond or no bond, DISD will need a portion of that 24 cent rate to fund ongoing maintenance needs. The bond simply allows the district to stretch that tax revenue in order to fund a greater portion of those maintenance needs today. Regardless, claiming that the bond will raise taxes, however murky the logic behind the claim, is effective rhetoric if you want to push voters away from supporting funding for public schools.

But this isn’t the full story. After all, even if Dallas ISD isn’t raising the tax rate, aren’t the bond financing projections based on an assumption that property owners will be paying more in taxes in coming years?

Well, yes, but not directly because of the bond. DISD calculated its projected financing of the bonds by assuming that property tax values will continue to rise, albeit at a slower rate than previously expected. So, the district does expect to be collecting more tax revenue, which will help finance these bonds. But there are two caveats important to mention here.

The first is that the district doesn’t sell bonds until funds are needed (there are still some bonds that were part of the total $1.6 billion bond package that passed in 2015 that haven’t been sold yet). If future property tax valuation forecasts are wrong and the district doesn’t see the rise in tax revenues it expects, it doesn’t have to issue the bonds. Meaning, even if it is approved, DISD can tap the brakes on this bond package to ensure that a future tax rate hike isn’t needed to meet future bond obligations.

The second caveat is that the district argues that now is a great time to issue the bonds because interest rates are low, which makes it less costly to finance the new bonds. If the district put off this bond package, the costs of the district’s many repairs, maintenance, and improvements would go up, and interest rates might also go up. A future bond package of this size will only become more difficult to finance without raising the tax rate.

In other words, if the Texas Legislature’s “property tax increase” language on the ballot hinges on a future hypothetical—that the district could reduce taxes if it doesn’t issue the bond—then the district has its own future hypothetical retort: this particular bond package represents a property tax reduction over what funding the same improvements would cost down the road if the district sat on its hands and did nothing.

And that’s the problem with the language that was slipped into House Bill 3: the hypothetical nature of its claims obscures the real issues at stake.

Now, you may not support the DISD bond. You may not trust the district to run a tidy ship; you may believe too much money is already being sunk into our public schools; you may believe that DISD should cut its tax rate instead of issuing the bond. You may also be glad that another provision in House Bill 3 that requires districts separate out various funding measures within the bond allows voters to support better school technology while opposing funding for new stadiums. If so, those are the real issues at stake in the bond election and you can voice your opinion about those issues by voting for or against any of the DISD bond measures.

But raising taxes is not really an issue that is at stake in the Dallas ISD bond election, even though the language on the ballot tells voters that they are voting on a property tax increase. The claim is misleading and disingenuous, and it would be a shame if that politicized obfuscation is what leads to a failure to pass the bond and a chance to improve education in Dallas.

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