Why the Dallas ISD bond isn’t projected to raise tax rates

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The approved Dallas ISD bond program will provide new schools, facility improvements across the district, and support for growing programs. Click here for an interactive map detailing the proposed projects.

The $1.6 billion bond program is also not expected to raise tax rates.

To find out why the bond isn’t expected to raise tax rates, The Hub asked the Dallas ISD finance department to learn more.

In short, the projected stable tax rate for the proposed bond is based on four factors:

  • The growth in the district’s tax base
  • The reduction of the district’s existing debt
  • Historically low interest rates
  • The ability for the district to use a variety of other debt management options

Growth in district’s tax base

The district is growing in tax base, which allows Dallas ISD to generate more revenue in terms of local property taxes without having to raise local tax rates.

The district’s taxable assessed valuation (TAV) for 2015-16 is $91,173,603,390, which is a 6.47 increase over 2014–15. This value is based on the certified report from Dallas Central Appraisal District.

The Dallas ISD finance department has completed growth rate/tax rate sensitivity analysis for two different scenarios of projected TAV growth.

  • Scenario 1: TAV growth of 6 percent in 2016-17, 3.5-percent growth in 2017-18, 3-percent growth in 2018-19, 2.5-percent growth in 2019-20 and 2020-21, 2-percent growth in 2021-22 through 2023-24, 1.5-percent growth in 2024-25 2026-27, and 0.5-percent growth thereafter.
  • Scenario 2: TAV growth of 6-percent in 2016-17, 3.5-percent growth in 2017-18 through 2019-20, 2.5-percent growth in 2020-21, 1-percent growth in 2021-22 through 2023-24 and constant (zero %) thereafter.

The results of the sensitivity analysis projects that even if the TAV growth rates past 2017 are half the rates projected by the finance department, tax rates are not projected to increase.

Reduction of existing debt

The district has refinanced its debt twice since 2014, saving the taxpayers approximately $120 million. In addition to refinancing, the district has executed the early repayment of existing debt, which reduced the district’s total debt obligations by another $13.1 million. These debt management activities have helped create a situation where the district’s existing debt payments will fall about $43.35 million per year starting in 2017; this includes the impact of the early repayment of bonds in addition to the district’s scheduled debt repayment of $216,066,210. As a result, the lower debt payments are anticipated to allow the district to make additional debt payments on approximately $600,000,000 in new bonds without experiencing any growth in its tax base.

Historically low interest rates

Interest rates are at 40-year historical lows, which significantly helps with the district expanding its debt capacity (i.e. the amount of debt that the district can issue) while not increasing the district’s tax rate to repay that debt.

The ability for the district to use a variety of other debt management options

Dallas ISD also has a number of strategies available to the district, to help lower interest rates and manage the tax rate. These include (1) variable rate bonds, which carry lower interest rates than the fixed rate bonds used in the analysis; (2) extending the debt; (3) delaying principal payments, or even debt issuance, if required; (4) utilization of surplus Interest and Sinking fund balances to augment the tax rates; and, (5) utilization of other debt management strategies, as needed.

For more information, visit http://www.dallasisd.org/bond2015.

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