On November 7th, Austin ISD is submitting a $1.05 billion bond to Austin voters for their approval. The bond deserves a close look, as with any proposed investment, from parents and taxpayers. Extra consideration is due in this case, as the school district has stated that the outstanding needs of the district actually come to $4 billion and thus this bond is only the first of a series.
Austin ISD has cited aging buildings, overcrowding, and a desire for modernization as justification for the bond (and presumably the subsequent bonds mentioned). While adequate facilities are indeed important for schools, a closer analysis of the proposal and AISD’s current situation suggest that this bond does far more than address critical needs and that other solutions remain to be explored. Further, the presentation of the bond’s proposal glosses over the actual impact that the $1.05 billion bond will have on taxpayers’ wallets.
In the bond summary, AISD indicates urgently needed repairs in schools across the district. Such repairs include roofing system replacement, HVAC improvements, plumbing and drainage improvements, and electrical system improvements. These are all items that could justify a bond asking for taxpayer money.
However, funding to correct these “Critical Facility Deficiencies” makes up only 19% of the entire bond package. The district is not simply asking for the $196,116,000 needed to make these critical improvements.
The bond also includes items such as $6 million to improve the press box, concessions, and restrooms at House Park; $23 million for new athletic spaces (and some academic renovation) at a single school (Austin High—the new elementary schools in the bond cost $31-36 million each); and $5 million for “undesignated furniture improvements.” While such upgrades may be desirable, the wisdom of going into hundreds of millions of additional debt to finance these kinds of improvement is debatable.
Taxpayers deserve the choice to support a bond to fix critical deficiencies in their schools without supporting irresponsible spending. It appears that the AISD school board strategically lumped critical repairs with a gamut of unnecessary spending to force taxpayers’ hand. After all, how can parents deny their children functioning schools? The bond is packaged in such a way that voters either choose all or get nothing, not even critical school repairs. Dividing the bond would have given taxpayers transparency and flexibility in determining what level of debt they are willing to incur.
There are schools that are overcrowded, such as Maplewood Elementary, operating at 141% capacity. Inversely, only one mile away is Campbell Elementary, which is severely under-enrolled, operating at only 37% capacity. This is a trend found at elementary, middle, and high school levels across the district. The issue facing the district is not a lack of seats. In fact, there are 1,456 elementary, 910 middle, and 2,479 high school seats currently vacant. If the school board were to redraw attendance boundaries in an effort to distribute students more equitably, it could potentially save taxpayers up to $600 million by avoiding the construction of new facilities.
A common criticism of redrawing attendance zones is that some children would be required to change schools. However, the proposed bond calls for building new campuses as well as shuffling the buildings schools are housed in. Therefore, the bond itself would require some students to change schools.
Austin ISD’s enrollment is in decline. In January 2016, AISD released a demographic report alongside a press statement that “[the district] can expect on average about 600 fewer students each year.” Preliminary enrollment data for the 2017-18 year shows a 1,640-student drop this year alone. The demographic report cited both lower birthrates as well as a lack of affordability in Austin as reasons for this trend.
When looking at the Intended Projects Summary Table, 13 items consider student capacity, making up 59% of the proposed bond or roughly $600 million. Most of the bond goes not toward critical improvements of existing schools but toward addressing student capacity as families migrate to the less-expensive fringes of the district.
It is ironic that the proposed solution for a problem caused by lack of affordability is to layer on more debt and higher taxes, accelerating the affordability problem even further.
The Hidden Tax Impact
AISD claims that the “$1.05 billion bond would not raise property tax rates.” Their carefully selected wording is correct, but it attempts to obscure the truth. Former Travis County Judge Bill Aleshire recently noted, “No one in their right mind should believe AISD can borrow $1 billion plus interest and not have a property tax increase as a result." In Austin’s current property market, stable property tax rates mean steady increases in property tax bills year over year. In fact, the AISD website confirms that they are assuming “anticipated increases in taxable assessed values,” in their bond planning and taxpayers should not expect their bills to remain the same.
AISD’s 2017 budget charts the increase in taxable value over the last ten years (note the column on the far right below). Even with decreases in school tax rates every year for the last three years (see “Table 80” below), the district’s revenue has grown steadily.
This is, of course, no surprise to anyone familiar with the concept of percents. Consider a hypothetical Austin home worth $100. Assuming the school tax rate is one percent (in Austin, the current rate is slightly above one percent, but 0.01 keeps this example simpler), the school taxes due on that house amount to $1.00. A year into the future, the value of that home rises 10 percent to $110 (as seen above, the net taxable property value has actually increased well over ten percent in the last three years); accordingly, assuming the school tax rate remains at one percent, the school taxes due on that house rise to $1.10. The next year, the house rises nine percent in value, making the value of the house $120. Naturally, the stable one-percent school tax rate results in an increased tax bill of $1.20. The rate remains the same, but the cost to the taxpayer is more. To keep the cost to the taxpayer level, the tax rate itself would have to be lowered to 0.9 percent the first year and 0.83 percent the second year.
Twenty additional cents is easily paid. But the taxable value of the average Austin home is not $100, it is comfortably over $300,000. Below is AISD’s calculation of the actual impact of rising property values to the average home over the last five years. Note that the bottom row, “Net Increase in Tax Levy,” builds year over year. In other words, from 2013 to 2017, the homeowner’s tax burden increased by $883. The homeowner paid 29 percent more in school taxes—almost a third more—in 2017 than he paid in 2013.
As these kinds of tax increases occur not only within the school district but also in city, county, and special district taxes, it is no wonder that Austinites can no longer afford their homes.
In sum, the number that most impacts taxpayer’s pocketbooks is not the tax rate, but the tax bill. Rising tax bills, however, are a poor slogan; they do not soothe taxpayers into voting for a bond trying to appear revenue-neutral.
Furthermore, AISD cannot guarantee that tax rates will not be raised. This bond is a proposal, not a contract. The ballot language states that “the board [shall] be authorized to levy, pledge, assess and collect, annual ad valorem taxes on all taxable property in the district sufficient, without limit as to rate or amount, to pay the principal of and interest on the bonds, and the costs of any credit agreements.” Even if the bond passes, Austin ISD still has the option to raise tax rates in the future. AISD does not have to keep any of its campaign promises, but taxpayers are beholden to the $1.05 billion in debt.
This is especially significant considering that the current $1.05 billion price tag is actually less than the expected cost of the bond projects. Additional funding for bond projects appears to be contingent on $40 million in unspecified land sales. As of October, the district has not made any decisions on which properties they intend to sell. AISD told one news source, “it’s too soon to say.” School Board President Kendall Pace says they could decide which schools to sell anytime in the next five years, long after the bond is passed.
Residents of East Austin fear that some of their schools are slated for closure and sale, and are fighting to prevent that scenario. Should those properties not be sold, it seems logical to assume that the projects would have to remain unfinished, the district would have to dip into reserves, or tax rates would have to be raised.
A Pattern of Irresponsibility
According to the Texas Bond Review Board, AISD’s outstanding debts (principal plus interest) total $1.18 billion. If voters approve AISD’s billion-dollar bond in November, then the district’s debts could soar to well over $2 billion.
Current AISD students may not reap the benefits of the proposed bond, but they will definitely pay for them. AISD has laid out a “Facility Master Plan,” which creates a detailed list of what each campus would ideally receive over the next twenty-five years. The proposed $1.05 billion dollar bond roughly funds only the first and part of the second of five “Groups” in that plan. Construction on Group 5 projects would begin, at the soonest, seventeen to twenty-five years from now—and by the look of AISD’s plans, would entail passage of several more billion-dollar bonds before that construction would begin. If a child attends a school in Groups 3, 4, or 5, odds are that child will have graduated by the time their school’s projects are due.
Those children will be out of school, but they will not be out of debt. According to AISD, it will take them until around 2040 to pay off their currently existing debt, not including the proposed $1.05 billion bond. If the whole series of bonds the school board is planning on were to pass, those children’s children could easily be paying off that debt as adults. Two generations could be liable for debt they were not even old enough (or alive) to vote on.
The AISD school board no doubt has good intentions, but this kind of planning gambles with children’s futures. Austin children would likely be better served by a more responsible, sustainable plan balancing needs and wants with available resources.