BOND BACKGROUNDWHY A BOND?
A bond is similar to a home mortgage. It is a contract to repay borrowed money with interest over time. Most school districts in Texas utilize bonds to finance major capital projects like renovations and new facilities. Bonds cannot be used for salaries or operating costs. Approximately 83% of KISD’s general budget pays for salaries and related costs. The remainder of the budget pays for utilities, supplies, professional development, and other nominal capital expenditures. If voters approve the bond election, the school district then may raise the Interest & Sinking tax rate to repay the bonds.
THE DISTRICT HAD A BOND ELECTION IN 2018, WHY NOW?
The 2018 bond election was the district’s first in 16 years, in which that time without an election the district grew by over 13,500 students. The 2018 bond election served to provide immediate relief for overcrowding and portable utilization resulting from past growth. The 2018 bond projects will eliminate portable classrooms at the secondary level and about half at the elementary level.
The 2020 bond will alleviate the remaining elementary instructional portable utilization but will also allow the district to look at accommodating growth into the future. With a five-year historical growth rate, the district continues to grow by approximately 500 students each year. The 2020 bond is aimed to help the district get ahead of this growth, and along with ES #39 and MS #15 to be funded through the district’s Strategic Facilities Plan, will accommodate approximately 9-11 years of growth assuming a 1% growth rate.
Additional reasons for the timing of the election considered by the Bond Steering Committee include:
- School property tax rate compression from the state legislature, property value growth and favorable market conditions have put KISD’s current tax rate 10 cents lower than it was in 2018.
- Today’s bond interest rates are at historical lows, making it an ideal time to issue new bonds. A Bond Buyer report from November 2019 showed the current rate level of 2.79% is lower than 99.8% of all rates since July 1961.
- Construction costs increase four to eight percent each year due to market inflation. Rather than waiting additional years to address foreseeable facility needs, this bond could save taxpayers millions in construction escalation by addressing these needs today.
WHAT IS THE STRATEGIC FACILITIES PLAN FUND?
The Strategic Facilities Plan (SFP) is designated savings and Federal dollars the district budgets and expends for facility-related expenditures including new schools and renovations. KISD has been able to transfer funds into the SFP historically from qualifying for Heavy Impact Aid, which are federal dollars allotted to school districts whose student populations are 35% or more federally-connected. The district has transferred $20 million a year on-average the past 10 years to the SFP. This has allowed KISD to build new schools like Smith Middle School and Douse and Wood Elementary schools without going to the voters to sell bonds.
WHY CAN’T WE KEEP RELYING ON THE SFP?
As the district grows, its percentage of federally-connected students drops each year in relation to the civilian, non-federal students. This trend is projected to continue, and KISD is anticipating not meeting the 35% requirement in the coming years. Without Heavy Impact Aid, KISD may not be able to make the transfer to the SFP like it has historically, which is why KISD has turned to funding school construction projects through voter-approved bond elections. In addition, bond elections provide the added benefit of state aid through the Existing Debt Allotment. KISD expects to receive approximately 38 cents per $1.00 in debt service from the state if a potential bond program is approved, funding it does not receive when a new school is funded through the general fund (SFP).
WHAT WILL THE DISTRICT USE REMAINING SFP FUNDS FOR?
The Administration has recommended to the Board of Trustees to designate SFP funds for the construction of Middle School #15 and Elementary School #39. These projects, coupled with the 2020 Bond projects, will accommodate 9-11 years of growth at a 1% growth rate.