If approved by local voters in November, Lake Travis ISD will shift its tax rate to retain roughly $3 million in additional revenue in the upcoming school year.
During an Aug. 11 board meeting, trustees officially called a voter approval tax rate election for Nov. 2—also referred to as a golden penny election.
The phrase golden penny represents pennies within a school district’s maintenance and operation, or M&O, tax bill, which are dollars primarily used towards staff salaries and benefits. These pennies have proven valuable to Texas districts as they are not subject to annual recapture payments.
The state’s recapture system requires ISDs with an allotment per student higher than $6,030 to contribute payments based on the district's taxable value, according to the Texas Education Agency. Those funds are then redistributed to districts statewide with a lower allotment per student.
LTISD, a property-wealthy district, is required to make annual payments to the state in what is considered excess in local tax revenue. However, an increase in LTISD’s golden penny fund would allow for the retention of that revenue.
If approved by a majority of local voters, the district will increase the M&O portion of its tax rate by $0.02. Simultaneously, LTISD will drop its interest and sinking rate, which is dedicated to debt services, by the same amount. As a result, residents will not see an increase in their overall tax bill, but LTISD will retain roughly $3 million in state revenue that would have otherwise been given to the state.
The process is often referred to as a “penny swap,” LTISD Chief Financial Officer Pam Sanchez said in previous board meetings. The shift can be achieved because LTISD has been effectively paying off its debt from former bond programs.
“There shouldn’t be any parent in our district against taking $0.02 from the I&S and putting it on the M&O side. Their tax rate doesn’t change, it only gives us more money to teach and operate,” trustee John Aoueille said during the meeting, calling it a win for students.
Trustees also approved a resolution in conjunction with calling the election, which, according to LTISD’s bond counsel, will protect the district’s revenue stream in the event the election does not pass.
That resolution states if voters approve a tax rate of $1.25010 per $100 valuation, the board will then reduce the I&S portion from $0.34750 to $0.32750, which will finally result in an overall tax rate of $1.23010 per $100 valuation. This means while LTISD adopted a tax rate $0.02 higher than last year's, it also approved a mechanism that will automatically drop that rate following a successful election, Bond Counsel Chair Clay Benford said.
“What I worry about is using fund balance on the I&S side to support a $0.02 drop and then the voters for some reason were to reject the M&O increase,” Benford said.
