Corrected: Fort Bend ISD considering tax rate "drop and swap"

Seeing no sign of increased public education funding from the state in fiscal year 2017-18, Fort Bend ISD officials are considering changing the district’s tax rate. At Monday’s board meeting, trustees will hear more on a proposed net 2 cent tax “drop and swap” to generate more property tax revenue for FBISD.

Voters would need to approve the rate change, FBISD Chief Financial Officer Steven Bassett said. The election would likely happen in either August or November, depending on how soon the district chooses to act.

As it stands, FBISD has a $1.34 per $100 valuation total tax rate that consists of a $1.04 per $100 valuation maintenance and operations, or M&O tax rate, and a $0.30 per $100 valuation interest and sinking rate, or I&S rate. The M&O tax rate is what generates money for FBISD’s general fund while the I&S rate generates revenue for the district’s debt services.

Bassett said earlier this month if FBISD were to lower the I&S rate to $0.26 per $100 valuation and raise the M&O rate to $1.06 per $100 valuation, it could generate about $18.6 million more in revenue. For a home valued at $250,000, this would mean a tax bill decrease of $50.

“Overall, it’s a decrease in our tax rate, and then we’re doing our best to maximize state revenues,” he said at the March 6 board meeting. “We’re trying to increase our recurring funds for the general fund and to have the financial capacity to maintain what we’re putting forth in the compensation investments.”

Trustees can vote to raise the M&O tax rate in a manner similar to the way they vote to set the district’s operating budget, but raising the M&O tax rate beyond $1.04 would also require an election. This is due to state rules about how high above the district’s $1 compressed rate FBISD can go before it must start submitting recapture payments from property tax revenue to the Texas Education Agency.

According to Lisa McBride, an attorney with firm Thompson & Horton, FBISD has the option to hold its tax rate election in the summer or fall. If trustees follow the state’s early tax rate adoption process, they would likely conduct the election Aug. 26 and if using the late adoption process, an election would likely be held Nov. 7, in conjunction with the November general elections.

Bassett said one risk with the tax swap is FBISD must adopt its FY 2017-18 budget in June before the election. Therefore, the district could be stuck with a lower debt services tax rate and a flat M&O tax rate if voters reject the measure.

“I guess the $64 million question is if there were to be another bond in 2018, 2019, whenever—what then?” trustee Dave Rosenthal asked Bassett.

The district predicts it will need a bond election in 2018 or 2019 in order to fund its capital plan projects outlined in 2013, FBISD spokesperson Amanda Bubela said in an email. However, Bassett said he was confident FBISD’s $59 million debt services fund and rising property tax values in the district could support the tax swap.

“I do think that because we’re being conservative in the property value estimates, I’m confident right now that I think we’re going to be able to handle bond 2018 without a tax increase again,” Bassett said.

*The original version of this story mistakenly referred to the tax rate election as a "swap and drop" and incorrectly stated the estimated number of revenue increase.