Questions swirl around social media over LHISD $98.6 million bond package
By MIKE EDDLEMAN
The Liberty Hill School Board’s decision to call a bond election was not even hours old when speculation took over on social media about what a bond would do to property taxes, whether there was a real need, and how the district might solve its growth issues another way.
Superintendent Rob Hart recently answered a number of the questions that cropped up repeatedly in the initial reaction to the announcement.
The predominant issue was how the new $98.6 million bond would impact property taxes. While the bond would lengthen the time school district taxes remain at the maximum $1.54 rate, there would be no change to the rate, and any annual increases to property tax bills would be dependent on increases in property values.
Some asked why not forego the bond and let the dept service tax rate shrink over time, but Hart said the decrease would not be seen for a couple of years and would be minimal even then.
“(When the debt rate might decrease) would depend on property value increases,” Hart said. “It would still be several years down the road and then by that point it would only be a penny or two, something like that.”
A two-cent reduction in the tax rate would equate to a savings of $60 annually on a home valued at $300,000.
Setting and adjusting the debt service rate is not something the school district can do arbitrarily, as raising and lowering the rate is dependent on strict guidelines from the state.
“What you have to do every year is when you set that tax rate, you have to pass the 50-cent test,” Hart said. “It is truth in taxation, you have to plug in your values and plug in what your tax rate is and what you’re generating out of that. Then that goes to the Secretary of State’s office and they come back and say you can’t collect at that high a rate because you don’t need that much to pay your debt.”
Hart said the district regularly refinances old bonds to create savings on interest rates, then that savings is applied to principle to retire debt earlier.
“We refinance the bonds every time they become callable, some at five, some at 10, some at 15-year callable notes to get them at a lower interest rate and we take some of that money and pay off principle,” he said. “In the fall of 2017, when some of that debt was refinanced, the district was able to take $1 million in savings and apply it to principle.”
When the accountability of the district is questioned in terms of taxes and promises, Hart says he has been up front on the need and costs from the beginning back in 2010.
“We haven’t lied to anyone,” he said. “We’ve been truthful in every bond issue we’ve run, and we’ve delivered. We’ve kept every promise, and when we ran that one in 2010, I stood up in front of a big group of people at Fellowship Baptist Church and I told them, ‘this is going to raise taxes, that’s the way we build schools in Texas.’
“This is not going to raise the tax rate,” he said. “They’re probably going to pay more taxes depending on the appraisal district and values, but that’s going to happen whether there is a school built or not.”
Why again so soon?
This bond proposal is the district’s third since 2010, leaving some voters wondering why bond elections come so often and questioning the long-term planning of the district. Hart said that is a result of bonding capacity, the district’s ability to sell bonds based on the projected ability to pay the debt.
In 2010, an $85.6 million bond was passed for the new high school, athletic facilities and other campus renovations. Then in 2016, a $35 million bond passed for Rancho Sienna Elementary School, an agriculture barn, and some other projects. Hart said at that time, the district was very up front about the fact another bond election would be coming in two years.
“When we passed the bond in 2010 to build the high school, we ended up having to take our (debt service) tax rate up to 50 cents,” Hart said. “At that point we couldn’t do anything in a bond issue because we couldn’t afford it, we didn’t have the bonding capacity. As the district grew, it became a little bit of a heartburn.”
The need for more space was nearly outpacing the growth in bonding capacity, but in 2016, there was enough capacity for the next bond, which opened the door for the $35 million issue that included Rancho Sienna. The school opened to students in August 2017.
“I knew we needed more classroom space in the district soon, but we couldn’t pass a bond,” Hart said of the lack of capacity. “After that, our homebuilding began taking off and home values started increasing, and in a matter of a year or two, we hit $35 million in capacity. That’s when we built Rancho Sienna, renovated the old elementary school, did a little bit in the Intermediate and then the ag facility. The reason that bond election was $35 million was because that did it. We couldn’t go higher.”
While values increased between 2010 and 2016 enough to allow for the $35 million bond in 2016, the explosive growth since then has tripled that capacity in only two years.
“Each penny carries more weight now than it did before so we had that cushion and we could do it,” Hart said. “In a matter of two years, now we can do $106 million. That’s how much the value has grown. It is that rapid.”
The costs for what is needed, based on research and recommendations of the community facilities committee, came in at $98.6 this time around — shy of the district’s current $106 million bonding capacity. Hart said this bond proposal should not be a surprise, and won’t be the last for the growing district.
“We made it very clear in 2016 that we’d be back doing this in a couple of years,” he said. “We made it very clear that this is not the last one. We are now one of those fast-growth districts that does it every two or three years, whatever the need is. Leander opens a new school every year it seems like. Pflugerville and Georgetown are doing another bond issue, it is just the way fast-growth schools are.”
The fast, consistent growth in the tax base and property values puts the district in a place of confidence regarding its financial projections as it considers bond proposals.
“Our value growth has been 18 to 22 percent the last several years,” Hart said. “We cut back on that projection and say how much can we afford at 15 percent. That gives us more confidence.”
No one likes adding debt, but Hart said it is inevitable with rapid growth, and the low-interest bonds, backed by the state, create the most affordable financing option for taxpayers.
“It is also guaranteed by the state, backed by the Permanent School Fund,” Hart said. “It backs school districts to go out for bonds, so if they default, which has never happened in the history of Texas, but if a school district does default on their bond, that money will pay for it. So you get a much better interest rate for your bonds because they are guaranteed.”
Do we need it?
Building new schools in the district is not something administrators or the school board plan for based on a desire to have a new building.
“All of this is built on need,” Hart said. “We didn’t just say a new school would look real nice out there.”
And that need is based on projections shown quarterly in the demographer’s report presented to the board.
The student population at the beginning of this school year was 4,360, keeping pace with the annual nine to 10 percent growth rate seen in the district. Hart said in 2012, 104 homes were started within the district, in 2017 that number was 743.
“We are at almost .8 students for every home built, so you take that 743 and multiply that by .8 and that’s how many new students those homes represent,” he said.
According to growth projections, which Hart says have been spot on for years, all campuses will exceed their current capacity by 2021.
The current projections show moderate growth would mean about 1,400 more students in three years, 2,400 in five years and a doubling of student population with 4,300 more students in 10 years.
Hart said building bigger schools is not really a better answer when looking at the quality of educational experience.
School population should remain around 800 for elementary schools, 900 for middle school, and 1,600 to 2,000 for high school.
“You don’t want kids to become anonymous, you don’t want to build a massive school,” he said. “In my opinion, it erodes the educational environment and it gets too big. That’s one reason we do smaller schools more often, the other is to be able to afford them.”
The long-standing debate over transfer students has also made taxpayers wonder if reversing that policy would slow the need for new campuses, but Hart said the 358 transfer students admitted by the district for this year would have no impact on the need.
“We looked at it,” he said. “We drew it out and we put them in every single grade level, on every campus and it didn’t change. If anything, it would only delay the need for the high school project by about a year.”
Of the 358 transfer students, 132 of those are children of district employees, meaning if all other transfers were turned away, the reduction in student population would be only 226.
If the district eliminated transfers, it would mean Liberty Hill would soon be sending money back to the state in recapture funds, and would be losing money it receives from the state for those students.
There is no tax money coming in for those students for debt service, but Hart said financially it is still a plus for the district.
“We get state funding for them, the same as we do for in-district kids,” Hart said. “If we didn’t have them, we’d still be building the schools.”
Who should pay?
Some on social media asked why home builders wouldn’t build schools for the district or why other tax monies couldn’t be used, but Hart said there are no other funds available for expensive projects like a new school building.
District salaries eat up 82 percent of the maintenance and operations (M&O) fund every year, which is $1.04 of the $1.54 tax rate.
“There’s not enough of it, because your cost to operate eats up your budget,” Hart said. “You could use what’s left over in fund balance. It is recommended we keep three-months operating expense in the bank. You could do some small projects. You could designate some of your fund balance into your maintenance staff to do a parking lot, or replace some air conditioning, but as far as going out and building a multi-million-dollar building, you wouldn’t have that much money in fund balance to do it.”
He said there were examples in a few places across the country where a company would contract to build a school, which districts would then make payments on, but that method would require the schools be paid for out of M&O funds.
As far as builders footing the bill, Hart said that’s nothing he has ever heard of, and said it is not the responsibility of a company to do so.
“It’s not their responsibility for one thing. It’s our responsibility to build schools and educate the kids,” he said. “Now, a lot of kids are coming because they’re building the houses, but they are building the houses here because people want to come to our schools. We are the ones that started this, so we’re the ones responsible for building schools and continuing a top quality education.”
The new elementary school is being built on land donated by the developer and valued at $300,000.
“They do partner with us on land,” Hart said. “The elementary school is on land donated from Santa Rita.”
Skeptical taxpayers ask how they can be sure their money is spent efficiently, and on what it is intended for, and Hart said the rules for bond projects and the last two bonds should put people’s minds at ease over how the money is used.
Once a bond is passed, the funds can only be used for what is spelled out on the ballot and can’t be shifted to different projects.
“It’s all you can use it for,” Hart said. “We’re audited every year. We have to have an auditor come in every year and look at both sides, our entire budget, then that’s presented to the board before the end of December. After the board votes to approve that audit, it goes to Texas Education Agency (TEA) and they study it. There’s no way around that. You can’t move it (bond proceeds) around.”
Hart added that the district has worked to be transparent with each bond project, regularly reporting to taxpayers on what is planned and what was done.
“We’ve always been truthful,” he said. “I now there are some things out there that say, ‘They lied to us last time’, I don’t know about what. We send out brochures that say here’s what we’re going to do with this money, then the report card that says here’s what we said we’re going to do and here’s what we did. And it has always been under budget and under time.”
One particular point of heartburn voiced by some was that the district didn’t shift its elementary campuses to kindergarten through fifth grade. Hart said once the new elementary was opened at Rancho Sienna, student population and growth projections just wouldn’t support the change.
“If we did that, this bond would have been a year ago and not now,” Hart said. “What we did is when we started drawing the attendance zones with our demographer, we started laying it out and realized at that point that putting fifth grade at all those elementary campuses would fill Rancho Sienna too soon and would not relieve the burden at Burden. Burden was over 800 (students) before we opened Rancho, you couldn’t move in that place, so it didn’t help us enough.”
The best alternative, to make full use of the classroom space available, said Hart, was to continue with the plan in place until the next opportunity to add campuses.
“We went back and ran the numbers again with fourth grade instead of fifth and that worked,” he said. “It grew faster than we could keep up with. That’s why we cut it back a grade level. Those are our projections and our ideas of going out and doing it. That’s not lying to people and saying we did something different.”