No. In fact, the tax rate has decreased for the past 5 years. This year’s tax rate is 18 cents lower than last year.

As Prosper ISD gains additional taxable value growth, we sell additional bonds. These are financed and paid back similar to an individual’s mortgage. The rates are dependent on the timing of the bond sale, as this authorization will have multiple bond sales over the next 5-10 years. The timing depends on the rate of taxable value growth and enrollment growth. 

 The money is coming from new taxable value in the district. This comes in the form of additional commercial tax base, additional homes, and growth on existing property. The tax rate is remaining the same, but the amount of value in the district continues to grow rapidly, which ultimately generates more funding.

 The district’s tax rate has continued to go down overall. The Interest and Sinking (I&S) side of the tax rate is at 50 cents and has been for many years. This is the cap and it cannot be increased. The previous 2019 bond was funded the same way.

In many fast-growth districts, a bond election may be needed every few years just to keep up with the growth. For example, 800 new students would fill a typical elementary school. Those students not only generate the need for additional facilities, but also buses, devices, desks and chairs, and other equipment.

As long as an over-65 homestead exemption is on file, the amount of school taxes paid should not increase (unless significant improvements are made to a home). There may not be a tax ceiling for other taxing entities, so as home values increase, their tax bills increase. The additional money is going to the other entities, not the school district. The school taxes should not increase after the year the homeowner turned 65.

Most school districts in Texas carry debt from bond elections because that’s how they fund construction of new schools, construction to renovate older campuses, replacement of expensive life-cycle systems, and additional capital projects.

Texas school districts are primarily funded through a combination of local property tax revenue and state funds.   It’s important to note that this funding system is complex, and the specifics can change yearly as the state legislature adjusts the formulas and funding levels.

1. Local Property Taxes:

   – Most funding for Texas school districts comes from local property taxes, primarily levied and collected by school districts.

   – Property owners within each school district pay property taxes based on the assessed value of property within each school district. These property taxes are collected by the school district’s tax office and are used to fund school district expenses and operations.

   – Each school district sets its property tax rate within certain state-mandated limits. The tax rate, when applied to the assessed property values (which are determined by the local appraisal district) in the school district, determines the local revenue available to the school district.

2. State Funds:

   – The state of Texas provides funding to school districts through a combination of general revenue funds and various education-related grants and programs.

   – The Texas Legislature determines the overall amount of funding allocated to education in the state budget, and this funding is distributed to school districts based on a complex formula known as the “Foundation School Program” (FSP).

   – The FSP considers factors like student enrollment, property values, and the school district’s “target revenue,” which is the amount the state believes each school district should receive in local property taxes to provide a basic level of education.

A school district’s tax rate consists of two parts:

1. a) Maintenance and Operations (M&O), which funds the General Operating Fund, which pays for salaries, supplies, utilities, insurance, equipment, and the other costs of day-to-day operations of the school district; and
2. b) Debt Service (Interest & Sinking or I&S), in which funds are used to pay for bonds issued for various special purposes approved by voters within the school district. For example, bonds may be issued (secured by the I&S taxes) to finance facility construction and renovation projects, acquire land, and purchase capital equipment, such as technology and buses. Unlike M&O taxes, I&S taxes levied to pay school district bonds remain the district’s property and are not subject to state recapture. The issuance of bonds secured by I&S taxes allows the school district to spread out the cost of paying for new capital improvements over time.

New projects were priced based on current project costs and adding expected inflation. This was all evaluated by construction contractors and compared with industry expectations.

For the renovations, we engaged an architect to walk through and evaluate each of those campuses and identify all the needs and improvements. They then provided estimates based on their experience with previous school renovations and additions.

Like a home mortgage, the issuance of voter-approved school bonds allows a school district to borrow funds secured by the I&S tax levied on properties within the school district. The Board of Trustees authorizes bond elections, and if voters approve, Texas law grants the Board of Trustees the authority to issue bonds secured by the I&S tax.

Through school bonds. In Texas, the issuance of school bonds allows school districts to raise funds for the acquisition, construction, renovation, equipment, and improvement of school facilities. School districts typically issue bonds to secure the necessary funds upfront and then pay back the bondholders over time with interest.  While the State of Texas contributes a small amount of funds to school districts to fund new buildings or renovations to existing buildings, the primary method of acquiring, constructing, and equipment school district facilities by a school district is through the bond election process and the issuance of school bonds, if approved by voters within the school district.

Before most bond elections, it is common for a school district to create a volunteer citizen committee to develop a bond package for presentation and recommendation to the Board of Trustees.

The Board of Trustees may then take such recommendations under advisement and call a bond election based on the specific uses of bond monies and the estimated costs for each project that the citizen committee established.

Like a home mortgage, the issuance of voter-approved school bonds allows a school district to borrow funds secured by the I&S tax levied on properties within the school district. The Board of Trustees authorizes bond elections, and if approved by voters, Texas law grants the Board of Trustees the authority to issue bonds secured by the I&S tax.

After voter approval of a bond election, the school district Board of Trustees can proceed to issue and sell bonds by adopting a bond order authorizing the issuance, sale, and delivery of the bonds.  Such bond authorization will include the allowed sale amount for each project that was approved by voters (e.g. general school facilities, technology, stadium or performing arts facility), the timing of the bond sale, and the general financial terms of the bonds.  The bond authorization will also set forth the legal provisions providing for the repayment of the bonds from I&S taxes that are levied and collected by the school district.  The interest rates on the bonds will depend on the school district’s bond credit rating and prevailing market interest rates at the time of the bond sale.  Factors that are considered when establishing a school district’s bond credit rating include the school district’s growth, enrollment trends, bund balance history, and the overall financial record of a school district’s financial management.  The bonds may also be enhanced by qualifying for and being issued as bonds that are guaranteed by the Permanent School Fund of Texas.  Market conditions at the time of the sale of the bonds bill affect the actual interest rates on the bonds (which may be higher or lower than original estimates).

Once voters approve a specific dollar amount of bonds to be issued for a project, the district’s Board of Trustees will adopt a bond authorization providing for the sale and delivery of bonds to investors.  The sale of bonds can occur occasionally and may not exceed the maximum amount of bonds approved by voters at the bond election.

Fast-growing school districts generally issue bonds (via action by the Board of Trustees) once or twice a year.

The interest rate paid is based on the district’s bond credit rating and the market interest rates in effect at the time of the bond sale.

Districts benefit from a higher bond rating, meaning a lower interest could be charged. Principal and interest on the bonds are repaid over an extended period with funds levied and collected via the I&S tax rate.

Thus, there are two parts to any bond process:
1) a bond election is conducted to specify the maximum amount of bonds the voters authorize the district to sell, and
2) action by the Board of Trustees to authorize the sale and issuance of bonds over a period of time, with the date and amount of each sale determined by the Board of Trustees. Note that a school district is not obligated to issue all of the bonds approved at a bond election, but the school district cannot exceed the voter-approved bond authorization.

Despite the ballot language, the passage of the bond package will NOT result in an increase in the property tax rate.  A new state law requires all school bond referendum propositions to include ballot language that reads, “This is a property tax increase.”  This language was added by the Texas Legislature for districts that struggle to meet the strict financial guidelines set by the state. However, that is not the case for Prosper ISD, as we have received the highest rating possible from the state for financial transparency.

In addition to student growth, the infrastructure must exist or be built in time to support new facilities.  The land east of Custer has been slower to develop due to lack of water, sewage and roads.   

While growth has occurred on the eastern side, it’s important to recognize that the pace of expansion on the western side has far exceeded it, necessitating us to erect structures west of the tollway.  Student growth dictates where and when new campuses are built.

However, there are changes slowly developing eastern side. There are ongoing infrastructure projects in the works, and we’re cautiously optimistic that these efforts will pave the way for the PISD to establish additional campuses in that area.

The state of Texas doesn’t provide funding for facilities. By law, bond funds may not be used to fund daily operating expenses or salaries. Bond funds may only be used for capital projects approved by district voters.