If approved, these Bond propositions will not increase the tax rate but rather will be paid for by revenue generated by anticipated increases in housing values and the resulting property tax payments.
Your school tax rate is made up of two parts. There are two types of taxes that make up your school tax bill. The first, M&O tax rate (Maintenance & Operations), covers operating expenses such as salaries and utility bills. The second, I&S tax rate (Interest & Sinking), raises revenue to pay debt service on capital projects (new construction, school buses and other equipment) or capital renewal (renovations to existing buildings).
Your tax rate is different from your tax bill. A tax rate determines how much a homeowner pays per $100 assessed valuation on their home. Because of how LISD has financially structured the bond, the projects in the 2021 package will not require an increase in tax rates. The total of your tax bill will be determined by applying the current tax rate to your projected property value.
The school district does not set property values. The bond package costs will be paid down over time at our existing tax rate using a conservative enrollment growth estimate and projected increases in property values. Funding for this bond program will not require an increase to the District’s current I&S tax rate.
Key Projects of Bond 2021 include:
For a complete list of items included in Bond 2021, please see the Projects section above.
School districts can only sell bonds if authorization is received by voters through an election. A bond is a debt instrument in which an investor loans money to the district. The proceeds from the bond are used to finance capital projects and other long-term items. The district repays the principal of the bonds, along with interest, over a period of time. Under current Texas laws, the maximum maturity of a bond is 40 years. Assets financed by the bonds that have a shorter asset life are sold with shorter maturities that align with their useful life.
The sale of bonds begins with an election to authorize a specific amount – the maximum amount of bonds the district is allowed to sell. The school district sells the municipal bonds as funds are needed for capital projects. On the day of the sale, interested investors submit orders for the bonds which have been priced according to market demands. Most bonds are purchased by large institutional investors or pension funds. Some may be purchased by retail institutions that sell them to individuals in the secondary market. Bonds are sold in multiple maturities meaning they mature at different times over a period of years. The interest rate is typically different depending on the maturity date. Longer maturities typically carry a higher interest rate. The interest rate is determined based on market conditions and the quality of the credit. In other words, the better the credit rating, the lower the interest rate on the bond and the lower the cost of borrowing.
In accordance with the Texas Education Code, bond proceeds can be used for the construction, acquisition, and renovation of school buildings, the acquisition of land, and the purchase of capital equipment such as technology and school buses.
The school finance formulas no longer provide the necessary funds that would allow the purchase of non-facility capital items through the General Operating Fund and still meet the ongoing day-to-day expenditures of educating students and running a large organization. In addition, it is advantageous to the district to pay for capital items – such as technology, buses, land and portable buildings – with bond money rather than from the General Fund as the cost can be spread over the life of the asset rather than a single purchase diluting the General Operating Fund.
Debt is not incurred until the Bonds are actually sold. Historically, the district has issued bonds over several sales from a particular Bond referendum. The Bonds are sold to align with the need for cash to fund the construction of schools and purchase equipment.
No. Voter approval is an authorization for the district to issue bonds. The bonds are sold in the future only when funds are needed.
A school district’s tax rate consists of two parts:
Maintenance and operations taxes fund the General Operating Fund, which pays for regular operating expenditures of the district, such as salaries, supplies, utilities, insurance, equipment and other costs. The Debt Service tax pays for school bonds and can be used only to retire the principal, interest and expenditures of bonds sold for specific purposes. The Board of Trustees adopts the tax rate each year, typically in August.
Upon reaching the age of 65, citizens can apply for an exemption in addtion to the statewide homestead exemption. The additional exemption of $10,000 from the state plus $3,000 from LISD is applied to the assessed value of the property, and school district taxes are frozen in the year the taxpayer turns 65 years of age. For any taxpayer whose bill is already frozen, you will not see an increase as a result of a school bond election.
LISD earned an A rating on the Financial Integrity Rating System of Texas (FIRST). Because Leander ISD has been paying off past debt ahead of schedule, the district’s projections show enough capacity in the I&S budget to pay debt service on the Bond without raising the I&S tax rate.
LISD will use a borrow-as-we-go financial model. The district will not borrow the total amount of the Bond on Day 1. Instead, the district will phase in bond sales as money is needed for construction. The Bond serves as an adjusted credit limit. It does not mean the district will be borrowing all of the money right away. Rather, the district will borrow as projects get underway.
Technology items with a shorter lifespan will be paid off early. The district recognizes that there are technology needs that involve more short-term assets. As a result, the district will pay these off sooner and will not borrow for 20-30 years for a laptop that only lasts five to seven years.
By refinancing outstanding debt, structuring new debt and taking advantage of early repayment options, the district has:
If the bond propositions are approved, some projects will start this school year with all projects on the list expected to begin by the spring semester of 2024.
If the bond propositions are not approved or specific propositions do not pass, LISD will consider alternative options for managing anticipated growth, including the possibility of utilizing portable buildings, implementing attendance rezoning, making operational budget cuts or reallocation, utilizing fund balance typically reserved for emergencies, and/or proposing future bond elections. We may also need to reconsider replacement cycles for equipment and technology devices.
Once high school band programs receive their allocation, we can then address middle school needs, as necessary. Some instruments are shared between high school and middle campuses, so the replacement at the high school impacts all band programs.