The tax rate at Mission CISD might be raised anywhere from 5.5 and 13 cents to help make ends meet as the district faces a $3.2 million shortfall this current fiscal year.
Committee members discussed the shortfall and possible tax increase during a recent finance committee meeting when budget personnel estimated an even bigger shortfall next year if the tax rate is not increased.
In 2011, voters approved a tax ratification election that did not change the overall tax rate, but bumped up the district’s maintenance and operations tax rate from $1.04 to $1.17 and lowered the district’s debt service rate by 13 cents. Before and after the tax ratification election, the overall tax rate remained the same at $1.30.
The state matches funding differently on the maintenance and operation side of the tax rate, so the swap allowed the district to receive $4 million more than it would have had the rates remained the same over the past two years.
But Rumalda Ruiz, assistant superintendent of finance and operations, said the swap now is affecting the district’s debt payments. The district has to make a $12 million annual bond payment. MCISD must collect $3.9 million in order for the state to match the district with $8 million to secure bond payment for the year.
But after the tax swap the district only is collecting about $2 million in debt service taxes. That wasn’t a problem the first two years, Ruiz said, because over the years, the district had collected more than its fair share of taxes and that money had been set aside by the state and was being matched.
“In 2011-2012, we had about $4 million in excess and that was supposed to carry us through the first and second year so that we wouldn’t increase the tax rate,” Ruiz said. “We are at the point where we no longer have that excess tax collection.”
When the tax swap was approved, the district’s budget officials had plans to raise the debt service tax each year to offset their growing budget. Because voters already agreed to move the 13 cents from the debt service rate to the maintenance and operations tax rate, the district now has room to increase the debt service rate without voter approval.
“Right now, because of those 13 cents that were moved from local, we are not maximizing on the tax revenue that we collect from our taxpayers,” Ruiz said. “Therefore, TEA is penalizing us because we are not collecting to get $8 million from the state.”
Ruiz said if the tax rate isn’t changed for the upcoming school year, the district will be looking at a $6 million shortfall.
MCISD should have its debt service rate at 18.5 cents for the 2014-2015 school year, according to a plan created for the district in the past, Ruiz said. In order to get the district the full $8 million of funding from the state and break even, the debt service rate would need to be raised to 26 cents. It’s currently 13 cents.
The Hidalgo County Appraisal District also anticipates a two percent property value increase. Ruiz said taxpayers would see a raise in rates either through property value increase or the raise of debt service rates.
Without a tax increase, the average property owner with a $78,402 home should expect to pay an additional $20 next year because of higher property values. With the 5.5 cent increase, homeowners could expect a $58 increase and taxes would increase $102 with a 13-cent increase.
“Basically we are using our fund balance just to break even,” Superintendent Ricardo Lopez said. “But if we don’t jump start it now, we will have to make cutbacks and we don’t want to have to face that.”
Ruiz said financially the district should move forward with a 26-cent debt service rate, but she understands the toll it would take on the community. She said her recommendation is to follow the original plan, which would bring the district to 18.5 cents, a 5.5 cent increase, and plan to pay $3.3 million from reserve funds to make up the balance.
Lopez said after the change, the school district would follow the plan to gradually raise rates each year. He added administration would explore different options to save money but the tax rate would need modification.
“Administration is looking aggressively at other places such as insurance,” Lopez said. “We could save $1.3 million by modifying insurance. Little things like that add up so we don’t have to take such an aggressive approach in the long term.”
Ruiz said that state formulas are used to establish funding amounts for the district, and that is constantly changing. She said any variable in the formula that changes would impact state funds for the district. Average daily attendance also is decreasing for Mission CISD, which could also lower state revenue for the district.