FGSC BOARD Brad Lancaster AIM relief for rapidly growing...
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FAST GROWTH ISSUES 50-Cent Debt Test for New Bond Issuance FGSC BOARD Brad Lancaster, Chair Lake Travis ISD David Vroonland, Past Chair Frenship ISD Randy Reid, Vice-Chair Keller ISD Mark Henry, Secretary Cy-Fair ISD Jeff Bailey, Treasurer Rockwall ISD FGSC POLICY CONTACTS David Anderson HillCo Partners (512) 480-8962 [email protected] Dan Casey & Bob Popinski Moak, Casey & Associates EDA, IFA & NIFA (512) 485-7878 [email protected] [email protected] Marty DeLeon Escamilla & Poneck 50-Cent Debt Test (512) 415-9610 [email protected] CONTACT FGSC Michelle Smith Executive Director (512) 536-1206 [email protected] 401 West 15th Street, Suite 695 Austin, Texas 78701 Legislative advertising paid for by the Fast Growth School Coalition 401 W. 15th St, Ste 695, Austin, TX 78701 WHAT IS THE ISSUE? The “50-cent debt test,” used by the Attorney General to evaluate new bond issues before bonds are approved for issuance, restricts fast growth districts’ ability to provide facilities for their students. The law states the I&S tax rate for any school district cannot exceed $0.50 per $100 to pay off a bond. This threshold cap is arbitrary as it does not take into account student growth or local taxpayers’ wishes who want more schools built. The law is also inefficient as districts cannot raise the I&S tax rate to pay off the bond sooner because of the $0.50 cap which leads to a longer repayment period and higher interest rates. Districts need to be able to build schools to keep up with the exploding growth caused by the significant economic development occurring in Texas. When the 50-cent test was put in place, there were 3.3 million students in Texas public schools. Twenty years later, there are now over 5 million students. Enrollment growth is concentrated in 85 fast growth districts which account for an astonishing 80% of all new Texas students. WHAT IS THE BACKGROUND? • 1991 — The Texas Legislature implemented the “50-Cent Debt Test” as part of Senate Bill 351 and it is currently incorporated within Chapter 45 of the Texas Education Code. Prior to the 50-Cent Debt Test the debt limit for school districts was 10% of taxable assessed valuation. • 2001 — The Test was amended to allow a projection of taxable assessed valuations to be used to demonstrate future compliance with the Test. Since that time, student enroll- ment has increased, construction costs have increased, taxable values have decreased and state funding assistance for the payment of bonds has declined. • 2009 — Rep. Aycock (R-District 54) filed HB 3697 which would have allowed school dis- tricts to exceed an I&S tax rate of 50 cents if a material interest cost savings was demon- strated through a shorter repayment period and it was approved on a local option basis. The bill did not pass. (continued on reverse) FGSC recommends updating the 50-cent debt test to provide relief for rapidly growing school districts and their communities. AIM
Transcript of FGSC BOARD Brad Lancaster AIM relief for rapidly growing...
FAST GROWTH ISSUES
50-Cent Debt Test for New Bond Issuance
FGSC BOARD Brad Lancaster, Chair Lake Travis ISD
David Vroonland, Past Chair Frenship ISD
Randy Reid, Vice-Chair Keller ISD
Mark Henry, Secretary Cy-Fair ISD
Jeff Bailey, Treasurer Rockwall ISD
FGSC POLICY CONTACTSDavid Anderson HillCo Partners (512) 480-8962 [email protected]
Dan Casey & Bob Popinski Moak, Casey & Associates EDA, IFA & NIFA (512) 485-7878 [email protected] [email protected]
Marty DeLeon Escamilla & Poneck 50-Cent Debt Test (512) 415-9610 [email protected]
CONTACT FGSC Michelle Smith Executive Director (512) 536-1206 [email protected] 401 West 15th Street, Suite 695 Austin, Texas 78701
Legislative advertising paid for by the Fast Growth School Coalition401 W. 15th St, Ste 695, Austin, TX 78701
WHAT IS THE ISSUE?The “50-cent debt test,” used by the Attorney General to evaluate new bond issues before bonds are approved for issuance, restricts fast growth districts’ ability to provide facilities for their students.
The law states the I&S tax rate for any school district cannot exceed $0.50 per $100 to pay off a bond. This threshold cap is arbitrary as it does not take into account student growth or local taxpayers’ wishes who want more schools built. The law is also inefficient as districts cannot raise the I&S tax rate to pay off the bond sooner because of the $0.50 cap which leads to a longer repayment period and higher interest rates. Districts need to be able to build schools to keep up with the exploding growth caused by the significant economic development occurring in Texas.
When the 50-cent test was put in place, there were 3.3 million students in Texas public schools. Twenty years later, there are now over 5 million students. Enrollment growth is concentrated in 85 fast growth districts which account for an astonishing 80% of all new Texas students.
WHAT IS THE BACKGROUND?• 1991 — The Texas Legislature implemented the “50-Cent Debt Test” as part of Senate
Bill 351 and it is currently incorporated within Chapter 45 of the Texas Education Code. Prior to the 50-Cent Debt Test the debt limit for school districts was 10% of taxable assessed valuation.
• 2001 — The Test was amended to allow a projection of taxable assessed valuations to be used to demonstrate future compliance with the Test. Since that time, student enroll-ment has increased, construction costs have increased, taxable values have decreased and state funding assistance for the payment of bonds has declined.
• 2009 — Rep. Aycock (R-District 54) filed HB 3697 which would have allowed school dis-tricts to exceed an I&S tax rate of 50 cents if a material interest cost savings was demon-strated through a shorter repayment period and it was approved on a local option basis. The bill did not pass.
(continued on reverse)
FGSC recommends updating the 50-cent debt test to provide relief for rapidly growing school districts and their communities.AIM
50-Cent Debt Test for New Bond Issuance (continued)
RELEVANT POINTS• In 2002-03, there were zero districts at the 50-cent I&S tax rate while four districts were at
40 to 49-cents. By 2012-13, the number had risen to 27 districts at 50-cents with another 61 districts at 40 to 49-cents.
• Fast growth district I&S rates are disproportionately high in comparison to the state average. For the 2012-13 school year, 17 fast growth school districts were at 50 cents with another 20 districts nearing the cap. To put this into perspective, almost 40 percent of fast growth districts are near the 50-cent I&S tax rate levy as compared to a state average of 9 percent.
• In some cases, the current 50-cent test prevents school districts from issuing voter-ap-proved bonds regardless of the local need for facilities and the sentiments of local voters. In other cases, districts have been forced to seek extended maturity dates on bond issues to comply with the test, at substantially higher interest costs.
• The current statute permits school districts to pledge Chapter 46 IFA/EDA revenue and eligible Chapter 42 Tier I revenue to meet the 50-cent test requirements, however many fast growth districts no longer receive IFA/EDA state funds.
• Potential solutions proposed by the FGSC:
• will not require complex school finance legislation,
• will not change the role of the Attorney General,
• will not have a fiscal note to the state, and
• will support transparency and accountability to the local taxpayer.
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