Pasadena ISD Bond-TRE 2017: Understanding two ISD tax rates

Pasadena ISD Bond-TRE 2017: Understanding two ISD tax rates
Posted on 08/23/2017
Pasadena ISD Bond-TRE 2017: Understanding two ISD tax rates

By Art Del Barrio

Pasadena ISD Director of Communications #PISDNews


Pasadena ISD has two items on the ballot for the November 7, 2017, election:  Proposition A which is a bond election asking voters to approve $135 million in construction at no tax increase for the Interest and Sinking (I&S) tax rate, and Proposition B which is a Tax Ratification Election asking voters to approve a 13 cent increase for the maintenance and operations (M&O) tax rate to keep the district in healthy financial status.


Wait, a no tax bond, but you want a tax increase?  I’m confused?


To avoid confusion, we must take a look at the entire Pasadena ISD tax rate.  By state law the school tax rate is actually a total of two different tax rates, the Interest and Sinking (I&S) tax rate and the Maintenance and Operations Tax rate (M&O).


The current I&S tax rate is $0.28 and the current M&O tax rate is $1.07.  Both rates combined equal $1.35 per $100 in home value.  The two tax rates cannot be commingled meaning there are strict laws set forth by the state ensuring they are kept as separate funds.


I&S tax rate

I&S funds generated by the I&S tax rate have the strict purpose to pay debt incurred by the district to build facilities, purchase land, renovate existing infrastructure, etc.  That debt is incurred by selling bonds.  Pasadena ISD may only purchase bonds with the permission of the taxpayers, thus, Pasadena ISD will hold a bond election to ask taxpayers for permission to spend its available I&S funds.


When Pasadena ISD called a no tax increase bond election, it means there are tax dollars available in I&S funds to repay bonds sold to fund construction projects without increasing the I&S tax rate.


“A good way to describe ‘no tax increase’ bond elections is to compare them to revolving credit, as you pay off credit, dollars are freed up and you can borrow again,” said Pasadena ISD Superintendent Dr. DeeAnn Powell.


“That is the reason why we aren’t requesting an I&S tax rate increase, we (Pasadena ISD) are great at managing our credit and we need the taxpayer’s permission to re encumber those available funds,” added Dr. Powell. “This bond election is part of the checks and balances necessary to spend I&S funds and the bond election is how the public gives its blessing.”


Powell adds that district officials are experts at maximizing I&S expenditures to keep a constant I&S tax rate, and make infrastructure purchases on a 3-5 year basis without having to raise the I&S tax rate like many other districts have already done.


M&O tax rate

M&O funds generated by the M&O tax rate are received by the district to conduct its everyday business, like paying for supplies, utilities, salaries, etc.  These funds are only a portion of the amount of money used to fund a district.  The state uses a formula based on several factors to determine how much a district will be matched in state funds for the M&O account.


As cost factors affecting public education continue to rise, the state’s share of funding education continues to decline.


Over the last 10 years the state has continued to reduce the amount of money school districts receive in matching funds.  A school district will collect revenue from property taxes through the M&O tax and the state will match those funds through a very complex formula.  The state average match was close to 50 percent from local M&O tax and 50 percent from the state but over the years that state average has dropped to about 62 percent from local M&O tax and 38 percent from the state.


Factors leading to the rise in cost of education are vast.  According to a recent publication by TASA/TASB entitled ‘State Mandates on School Districts,’ the impact of inflation, especially on staff salaries is one of the largest cost factors in school districts. Further, unfunded and underfunded mandates from the state legislature dramatically impact the bottom line.  


The publication states that other factors impacting the budget include: the growing student population, the growing population of economically disadvantaged students, and the increased costs of utilities, fuel and insurance.


The Pasadena ISD Board of Trustees and administration waited patiently to see if the Texas State Legislature was going to increase funding for M&O budgets.  Since the legislature failed to adequately address state funding, Pasadena ISD was forced to dip into its fund balance reserves to accommodate a $22 million deficit budget for 2017-2018.


A 13 cent tax increase on the M&O tax rate would bring much needed relief to the district’s M&O fund.  The tax would bring in approximately $16 million in local revenue and force the state to match approximately $20.7 million in addition totalling roughly $36.7 million annually for Pasadena ISD.


Bond Election

At an August 16, special board meeting, the Pasadena ISD Board of Trustees unanimously called a $135 Million no tax increase Bond which will be known as Proposition A.  


Proposition A will utilize available I&S tax revenue for needed construction projects across the district.  


The Pasadena ISD Future Facilities Planning committee is developing a short list of projects to propose based on a master list of needs created by the committee in 2014.  For the last 10 years Pasadena ISD has held no tax increase bond elections and seeks taxpayer permission to utilize available I&S tax revenue for the projects. Which means if Proposition A is approved by voters in November, there would not be an I&S tax rate increase; it will remain at $0.28 per $100 in property value.


Tax ratification election

In addition, at the same special board meeting, the Pasadena ISD Board of Trustees unanimously called a Tax Ratification Election or TRE which will be known as Proposition B.


Proposition B will ask voters for the additional 13 cents per 100 dollar valuation on their property taxes to support Pasadena ISD’s M&O tax rate that would eliminate the deficit budget, help the Pasadena ISD maintain a healthy fund balance and allow the district to be prepared for future inflation, maintain student programs, and recruit and retain quality staff.


If approved, the impact of Proposition B on an average $130,000 home in Pasadena would be approximately $9.97 a month or 33 cents a day.



If you are over 65 or disabled and your taxes are frozen by the over 65 or disabled exemption, your taxes will not be affected by Proposition B. Please contact the Pasadena ISD Tax Office if you need further information about the over 65 or disabled tax exemption.


If you have any questions regarding Proposition A or Proposition B, please visit the Pasadena ISD website at:


www1.pasadenaisd.org/2017bondtre


Early voting is October 23 - November 3.

Election Day is November 7, 2017