FREQUENTLY ASKED QUESTIONS
1. What is a bond?
A bond is similar to a home mortgage. It is a contract to repay borrowed money with interest over time. Bonds are sold by a school district to competing lenders to raise funds to pay for the costs of construction, renovations and equipment. Most school districts in Texas utilize bonds to finance renovations and new facilities.
2. How can bond funds be used?
Bond funds can be used to pay for new buildings, additions and renovations to existing facilities, land acquisition, technology infrastructure and equipment for new or existing buildings. Bonds cannot be used for salaries or operating costs such as utility bills, supplies, building maintenance, fuel and insurance.
3. What is a bond election?
School districts are required by state law to ask voters for permission to sell bonds to investors in order to raise the capital dollars required for projects such as renovation to existing buildings or building a new school. Essentially, the voters are giving permission for the District to take out a loan and pay that loan back over an extended period of time, much like a family takes out a mortgage loan for their home. A school board calls a bond election so voters can decide whether or not they want to pay for proposed facility projects.
4. Exactly how much is the District asking for?
The Board of Trustees called a bond election in the amount of $125.9 million to be brought before voters on May 9, 2015.
5. How is a determination made regarding the total amount a school district can include in a bond package?
Working with a financial advisor, the bond capacity is calculated based on current property values in the district, using the proposed tax rate. During Lancaster ISD’s planning process, future property values have been considered as well. However, the district may only sell bonds they have the capacity for.
6. How was the bond package developed?
The bond package was developed by a Bond Steering Committee consisting of local citizens, business leaders, parents, school administrators and staff. The committee met weekly and studied the district’s community survey results, the current educational facilities, facility options and cost estimates from the District's Architect, financial information from the District’s Financial Advisor and input from campus/district staff. The committee then developed recommended projects for the Board of Trustees to consider. The recommendations were presented to the Board on February 12, 2015 and the Board voted to call the bond election on February 23, 2015.
7. How is the District’s tax rate configured?
A school district’s tax rate is comprised of two tax rates: the Maintenance & Operations tax (M&O) and the Interest & Sinking tax (I&S). The M&O rate is used to operate the school district, including salaries, utilities, furniture, supplies, food, gas, etc. The I&S rate is used to pay off school construction bonds. Bond sales only affect the I&S rate.
8. How will the proposed bond election affect my taxes?
If the bond election is approved by voters, the estimated maximum tax impact of this bond is anticipated to be $0.17 for a total tax rate of $1.54. For the average taxable home value of $73,000, this represents an increase of approximately $10.37 per month.
9. How do I calculate my personal tax impact for the bond package?
To calculate your personal tax impact from the bond package, divide the taxable value of your property (less homestead exemptions) by 100. Then, multiply that number by .17 for the annual impact of the total bond proposal. You can also use the tax calculator on the Tax Information page to calculate your personal tax impact.
10. What if I am over 65 years old? Will my taxes go up if the bond is successful?
No. If you have applied for and received the Age 65 Freeze on your homestead, by law, your school taxes cannot be raised above their frozen level.
11. Who is eligible to vote in this election?
Any registered voter that resides within the school district boundaries.
12. Can I still register to vote in the election?
The deadline for voter registration is April 9. If you are not registered to vote by this deadline, then you are not eligible to vote in this election. You can pick up a registration card from your local post office, the Lancaster ISD Administration Building or you can register online.
13. After I have registered, when will I receive my Voter Registration Certificate?
You should receive a Voter Registration Certificate within 30 days. On Election Day, please bring your certificate to your local polling place if you have it. However, all that is required is a valid driver’s license.
14. What is LISD' s bond rating?
Lancaster ISD’s current, unenhanced bond ratings are both investment grade – “A2” by Moody’s Investors Service (“Moody’s”) and “A” by Standard & Poor’s Ratings Services (“S&P”). It is anticipated that the bonds issued pursuant to the proposed 2015 Bond Program will be rated “Aaa” and “AAA” (the highest rating available) by Moody’s and S&P, respectively, based upon the Permanent School Fund Guarantee Program of the State of Texas.
15. What interest rate does LISD expect to pay?
For purposes of determining the projected tax rate impact associated with the proposed 2015 Bond Program, the District has conservatively assumed an interest rate of 5.00%. Although we will not know the actual interest rate on the bonds until the election is approved and the bonds are sold, tax-exempt interest rates are currently near historical lows and based upon other recent Texas school district bond sales, the interest rate would be less than 4.00% at this time.
16. For how many years will the school district repay its bonds?
Similar to a home mortgage, the bonds will be structured with annual principal and interest payments over a 30-year period. We will also have the flexibility to repay the bonds over a shorter time period and such decisions will be made by the Board of Trustees on an annual basis as part of the normal budget process.
17. Will the district pay annually or semiannually?
We will make annual principal payments and semiannual interest payments on the bonds.
18. Given the district's current taxable valuation, how much money can the school district raise right now given its bond rating, an assumed interest rate, and the various repayment periods?
Like all Texas school districts, the dollar amount of bonds that Lancaster ISD may issue is limited by the State mandated “50-Cent Debt Test”. At this time, based upon conservative assumptions of interest rates and taxable values, our initial sale of bonds from the proposed 2015 Bond Program would approximate $46 million – which would fund the proposed safety and security upgrades within the district, construction of a new West Main Elementary School and the construction of Pleasant Run Elementary School. We would issue the remaining bonds for the proposed capital improvements as permitted by the 50-Cent Debt Test.
19. How much will the school district have to pay bond counsel, underwriters and other costs of sale and how will that affect the net yield when the district sells the bonds? Given the reasonably expected net yield upon the sale of the first set of bonds, which projects can be realistically accomplished first, and in what order will subsequent projects be financed?
The various costs incurred to sell the bonds, such as underwriting fees, bond counsel fee, etc. will depend upon many factors, including the number of bond sales, the size of each bond sale, method of sale, etc. Based upon an initial proposed sale of bonds totaling $46 million, the estimated costs of issuance (bond counsel, bond rating agency fees, Permanent School Fund Guarantee fee, financial advisor, Attorney General fee, etc.) is estimated to equal approximately $225,000 and compensation to the bond underwriters to sell the bonds is estimated to equal $300,000. While the costs incurred are important and a focal point for Lancaster ISD, the interest rate on the bonds is also very important. For example, a difference of 0.05% on the 2015 Bond Program will change the district’s interest cost by approximately $1.475 million, which is more than the fee to be paid to any member of the district’s financing team.
It is currently anticipated that the first bond sale in the amount of $46 million would fund the proposed safety and security upgrades within the district, the construction of a new West Main Elementary School and the construction of Pleasant Run Elementary School. The proposed Ninth Grade Center would be the next project completed, followed by the construction of a new Lancaster Middle School.
20. Will bond rating agencies let Lancaster tax at 100% of the legally allowable maximum of $.50/$100.00, leaving no room for uncollectable taxes or fluctuations in total valuation due to economic downturn or other factors? If Lancaster taxes at 100% of its legally allowable debt rate and total market valuation declines, how will Lancaster make up the shortfall?
Pursuant to the State mandated “50 Cent Bond Test” and like all Texas school districts, prior to issuing any bonds from the 2015 Bond Program Lancaster ISD must demonstrate to the Attorney General of the State of Texas that its new and existing bonds can be repaid from a maximum Interest & Sinking Fund (Debt) tax rate of 50.0 cents or less. Only with approval of the Attorney General are we legally able to issue any bonds. Once issued, Lancaster ISD’s tax rate will be annually set by the Board of Trustees based upon current taxable values, annual State funding received for repayment of bonds (which equals approximately $2,472,990 for year 2014/15) and certain other factors. Should Lancaster ISD’s taxable values decline in future years and all other factors remain constant, the current State funding system would provide more State funding to LISD for bond repayments – which would help mitigate the loss of tax revenues. In addition, the District maintains an I&S fund balance (totaling $2,424,653 as of August 31, 2014) and certain other reserves could be used to address a reduction of future tax revenues. The District also has the ongoing flexibility to refinance its bonds to restructure its annual bond payments or to the degree available, lower its interest cost. Lastly, once the bonds are issued and although not anticipated, Lancaster ISD is legally required to set an I&S tax rate sufficient to make its annual bond payments and such rate may exceed 50-cents, if necessary.
Bond rating agencies, such as Moody’s Investors Service and Standard & Poor’s Ratings Services, only provide a rating on the bonds to reflect their opinion of LISD’s creditworthiness. The rating is based upon their independent review of various financial, economic, debt and management factors – which includes a community’s perceived support of the school district. The bond rating agencies have no legal authority to approve the issuance of LISD voter approved bonds or the setting of a tax rate for repayment of bonds. Such actions are governed by State law and are the responsibility of LISD’s elected Board of Trustees.
21. Are there any surrounding school districts that are taxing at 100% of the legally allowed maximum debt tax rate?
Pursuant to the Property Tax Division of the Texas Comptroller of Public Accounts, there are 27 Texas school districts that have an Interest & Sinking Fund (Debt) tax rate of 50.0 cents for fiscal year 2014-2015. The following summarizes the school districts in North Texas that currently have an Interest & Sinking Fund (Debt) tax rate of 45-cents or higher.
■ Allen ISD
■ Keller ISD
■ Anna ISD
■ Lake Dallas ISD
■ Argyle ISD
■ Lake Worth ISD
■ Aubrey ISD
■ Little Elm ISD
■ Bland ISD
■ Lovejoy ISD
■ Burleson ISD
■ Mansfield ISD
■ Caddo Mills ISD
■ McKinney ISD
■ Cedar Hill ISD
■ Midlothian ISD
■ Celina ISD
■ Millsap ISD
22. If the need is for classroom space, why does it make sense to tear down two elementary school buildings instead of renovating them, retaining those classrooms, and building a new neighborhood school, thereby increasing the number of classrooms?
We studied the costs of renovating the existing buildings to increase capacity, meet TEA standards and provide a level of equity and found that the cost to do this was about 74% of what a new building would cost. In doing this, there would still be systems of the building that would be original to the building’s construction and still represent on-going problems. In their deliberations, the Bond Steering Committee considered this and they believed that making that level of investment in a facility 60 years or more in age was not a cost-effective solution for the district.
23. Why don't we use temporary classrooms until we have enough students to fill a new elementary school?
The Bond Steering Committee analyzed the demographic study and the facilities assessment of the district and identified the current proposal as the best possible option to deal with safety and security, current and future growth patterns and facility conditions. The two elementary campuses that will be replaced with this bond are both more than 60 years old. The normal useful life of a school building is 50 years according to industry standard. The new facilities will also be more energy efficient and more equipped for 21st Century learning experiences.
24. How much of the student population increase is due to the addition of pre-K programs?
In the 2013-2014 school year, we experienced growth in elementary mandatory grade levels,2nd through 5th grade and significant growth in our secondary schools during the 2014-2015 school year in grades 6th through 10. While the addition of the Pre-K3 program has allowed us to intervene earlier with our students for achievement purposes, Pre-K3 has not been a significant contributor to growth.
25. How will the creation of a 9th grade center affect transportation and maintenance costs in the long run?
The impact on the transportation department will be low due to the opening of a ninth grade center. There is a greater number of high school students who live within a two mile radius of the ninth grade center than Lancaster High School. The replacement of equipment at the ninth grade center in the remodel would lower the maintenance costs.
26. If the capacity of West Main and Pleasant Run is increased rather than build a neighborhood school, how will that affect transportation costs in the long run?
The impact on the transportation department will be low due to the opening of a new West Main and Pleasant Run Elementary. The attendance zones for all the elementary schools would have to be re-drawn by a committee of parents, staff and community. The committee will consider the impact on transportation that the new attendance zones will have.
27. Is this school district committed to neighborhood schools?
Yes, we prefer neighborhood schools where possible.
28. Will each of the new elementary schools accommodate 600 students rather than the existing 300?
Yes. The two schools will be built large enough to accommodate the total number of students at West Main, Pleasant Run and additional district growth.
29. Will the new schools be one story or two story? Are two story elementary school buildings generally looked upon with favor?
The new elementary schools will be two-story buildings. Two-story buildings are common in areas where the lot space is limited.
30. How will two story buildings increase maintenance costs for handicapped access, such as the need for elevators?
The maintenance cost for an elevator is around $3,000 per year. The cost includes regular inspections, maintenance and monitoring of the help call button.
31. Did we not spend a substantial amount of money replacing the roofs and air conditioners at W. Main and Pleasant Run just a few short years ago? What was the reasonably anticipated useful life of those roofs and air conditioners when they were installed just a few short years ago? Are we going to tear down buildings that have recently installed roofs and equipment that is not near the end of their useful lives?
The work that was performed in the summer of 2013 did not include roof replacement, but did include the replacement of the air conditioning and lighting equipment. The anticipated useful life of the air conditioning equipment is 20 to 25 years with routine maintenance. In design the work, the district chose equipment that would allow us the greatest flexibility of re-using the equipment. Therefore, the air conditioning equipment will either be used on the new buildings or will be used to replace equipment in the district that has exceed the useful life. The design process will determine where the equipment will be used.
32. What is the status of the prior 2004 Bond?
The 2004 Bond has been managed quite efficiently. We are on schedule to the pay the bond off during the 2021 school year. With prudent financial management, we have decreased the principal owed by more than $3.5 million through our refunding efforts. We have also saved about $7.4 million in interest payments and are scheduled to pay off the 2004 Bond 12 years earlier than anticipated. This shows that we have been good stewards of tax payer funds and are delivering on our promises. In addition, we currently have a superior financial rating from TEA.
33. Why didn’t we put together a smaller bond package or allow the voters to select from a list of options?
The Bond Steering Committee was charged to think beyond the next 3 years and consider the next 5 to 7 years. The committee was adamant about being thoughtful of both our short-term and long-term needs and elected to put together a comprehensive package that could address the needs with the fewest number of bond elections.
The committee considered a smaller bond amount that would only address West Main and Pleasant Run and decided that it would be shortsighted due to the results of the demographic study which shows that our student growth trend is expected to continue at an aggressive rate. The committee made the decision to begin addressing our growth now which caused us to look at the renovation of Lancaster Elementary to become a ninth grade center. The committee considered stopping at that point, however, when they reviewed the condition of the middle school in the context of 21st Century learning, technology and STEM, an overwhelming majority of the committee members felt like it was equally important to address the needs of the middle school as soon as possible.
There was an option to delay work on the middle school and not consider it in this bond. This would mean that if this current bond passes, we would likely have to call for another bond in the next 3 to 5 years. The committee was unanimous on the fact they wanted to have the fewest number of bond elections possible within the next 7 to 10 years. In addition, it costs the district $75,000 to $100,000 to conduct a bond election, not including personnel time devoted to these efforts. The committee considered all of the aforementioned factors in their deliberation and ultimately selected the current bond package.
34. How will you build new schools on their own property and stay within TEA guide lines on playground area and safety of kids?
The playgrounds at West Main and Pleasant Run Elementary will be re-located during the construction of the new buildings. The new location of the playgrounds will be determined by the design of the new building. The re-located playgrounds will continue to be accessible to the public and meet TEA guidelines and city codes.
■ Commerce ISD
■ Princeton ISD
■ Crandall ISD
■ Prosper ISD
■ Crowley ISD
■ Rio Vista ISD
■ Denton ISD
■ Royse City ISD
■ Ennis ISD
■ Tioga ISD
■ Forney ISD
■ Tolar ISD
■ Gunter ISD
■ White Settlement ISD
■ Jacksboro ISD
■ Wylie ISD
Your public school taxes involve two figures: Maintenance and Operations (M&O), used to pay for salaries, utilities, furniture, supplies, food, gas, etc.; and Interest and Sinking (I&S), used to repay debt. Bond elections affect the Interest and Sinking tax rate.
Currently, Lancaster ISD’s Interest and Sinking (I&S) tax rate is $0.33. When combined with the district’s Maintenance and Operation (M&O) tax rate of $1.04, the total tax rate for Lancaster ISD is $1.37.
If the bond election is approved by voters, the estimated maximum tax impact of this bond is anticipated to be $0.17 for a total tax rate of $1.54.
For the average taxable home value of $73,000 (net of the state-mandated $15,000 homestead exemption), this represents an increase of approximately $10.37 per month
The District’s total tax rate has declined by 48.44 cents or 26.1% over the last 9 years.
Impact on Senior Citizens’ Property Taxes
Lancaster ISD property taxes for citizens age 65 or older or disabled would not be affected by the bond as long as a homestead and Over 65 exemption application has been filed. Under state law, the dollar amount of school taxes imposed on the residence homestead of a person 65 years of age or older may not be increased above the amount paid in the first year after the person turned 65, regardless of changes in tax rate or property value, excluding the value of any new improvements, such as additions or renovations, that increase the value of such homesteads.
Contact your local appraisal district with questions regarding the Over 65 exemption
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