In Texas, the statutory maximum maintenance and operations (M&O) tax rate for a school district is $1.17 per $100 in property valuation, and districts have to put it to a community vote – called a Tax Ratification Election – to raise the rate above $1.04. Keller ISD is currently at that $1.04 M&O tax rate – as it has been for more than 10 years – and such a move would net the District an additional $19 million in annual revenue.

At the same time, the District is in a position to correspondingly lower the interest and sinking (I&S) portion of its tax rate due to increases in property values, fiscally responsible refinancing, paying off principal, and much slower growth resulting in the construction of fewer schools as compared to the rate of growth over the past 20 years. Texas’ statutory maximum I&S rate for school districts is $0.50 per $100 in property valuation, and KISD’s rate is currently at $0.48. Looking at plans for the future and conservative estimates for continued increases in local property values, Keller ISD’s Board of Trustees is committed to offsetting any increase in the M&O rate, and actually decreasing the I&S rate by $0.14.

This plan would create an overall tax rate of $1.51, representing a decrease of $0.01 over Keller ISD’s current rate, while bringing in an additional $19 million in revenue for the District.

The state of Texas school district funding formula currently assigns Keller ISD $7,753 in revenue per student*. This figure ranks Keller ISD 12th out of the 12 public school districts in the Dallas-Fort Worth area that are in KISD’s peer group (a group with which Keller ISD benchmarks) when it comes to revenue per student – $1,000 off the average and $2,320 less than the district with the most revenue per student. When taking into consideration Keller ISD’s 35,000-student population, that equates to $81 million annual revenue that KISD does not receive compared to the district with the most revenue per student in KISD’s peer group.

With $19 million in additional revenue, Keller ISD would be able to continue funding instructional programs for students and keep its teaching salaries competitive with other school districts in the area.

*Includes revenue from local, state, and federal sources.

School district revenue in Texas is collected from two different tax rates and in two different funds – interest and sinking (I&S) which can only be used to pay down a district’s debts from selling bonds for capital projects, and maintenance and operations (M&O) which pays for the district’s operating expenses and can be used for anything (including paying off debt, if needed). Keller ISD is at the statutory maximum M&O rate without voter approval ($1.04) and cannot realize additional revenue for its operating budget without increasing that rate.

Meanwhile, Keller ISD is approaching facility build-out and will likely only need to build one more elementary campus. That fact along with the fact that the District has made fiscally responsible refinancing decisions (saving more than $107 million in interest) and local property values have increased over the last several years, puts Keller ISD in a position to lower its I&S rate and still maintain its existing debt payment schedule while keeping capacity for future bond elections without requiring tax rate increases.

In 2006, the Texas state legislature passed a new system for funding public school districts. The legislature established a targeted student revenue formula that was based in part on school districts’ tax rate at the time. The statutory maximum M&O tax rate at the time was $1.50, but Keller ISD’s rate was $1.43. Due to KISD’s lower tax rate, the formula assumes that the District did not need as much in revenue as districts that were taxing at the maximum rate.

That formula is still in place today. Keller ISD was involved in a lawsuit from 2011-2016 along with 1,200 other districts, arguing that the state’s funding formula was unfair and inequitable. After winning in two courts, the Texas Supreme Court overturned the decision and ruled in favor for the state, stating that while the funding formula has many flaws, it was the legislature’s place to determine public education funding issues.

Yes, the amount of money Keller ISD residents pay to the district is received by the District, however, Keller ISD does not realize those increases in the same amount. Due to the state’s funding formula, as school districts receive more local funds, the state reduces the amount of funding it provides to the district. The result is that increased property values do not equate to significant increases in KISD’s operating budget.

Keller ISD’s Board of Trustees called for a Tax Ratification Election (TRE) in 2011 that would have increased the M&O tax rate without reducing the I&S rate and the result would have been an overall tax rate increase. At that time, the District was still building new campuses, and could not have a reduced capacity in its I&S rate. Voters did not approve that tax rate increase. The proposed Swap & Drop plan for this TRE would lower the overall tax rate.

Yes, Keller ISD’s Finance team has put together calculations using conservative estimates for future property value growth that would still allow the District to sell bonds in the amount of $100 million every three years for the next 10 years and still not need to raise the I&S rate. While Keller ISD only foresees the possibility for one more elementary campus in the coming years, older facilities will continue to need repairs and maintenance that require funds from bond elections. However, Keller ISD has never called a bond election for more than $180 million and the Board of Trustees has stated its commitment to not raising the District’s overall tax rate and lowering it whenever possible in both an adopted resolution and language in local Board policy.

Keller ISD's Board of Trustees has provided the community with assurance of its intentions to lower the I&S tax rate by $0.14 and to continue to look for additional opportunities to lower the tax rate. For starters, the ballot itself includes language that states that a vote for the resolution is for the purpose of "decreasing the overall ad valorem tax rate by $0.01." The Board also adopted a resolution last spring stating its commitment to the Swap & Drop plan and to work to reduce the overall tax rate when it is able to, and updated District Policy CAA (LOCAL) that states the District is committed to taxing "only to the extent necessary to adequately fund the District," and that if any future Board attempts to raise the tax rate by more than 4 percent, it will trigger the ability for the community to petition for an election to approve the tax rate increase.

Outside of that newly adopted policy language, the Board can adjust the I&S tax rate as needed to meet the District debt service obligations, however, there are only a few situations where that would be necessary – one of which would require voter approval for a Bond Election and the other would likely not have an impact on the amount of taxes paid.

With regard to a Bond Election, our conservative projections show that it would have to be a massive bond package to require a tax rate increase of any kind. On our TRE Swap & Drop site, we have a document that outlines Bond Capacity over the next decade. That shows that the District could sell bonds as high as $205 million three times in the next decade without raising the I&S tax rate from the proposed $0.34. Please note, that is not the District's current plan and Keller ISD has never even called for a single bond over $200 million; this is just an example of capacity.

The other situation in which the Board may have to increase the I&S rate is if home values plummet and the $0.34 I&S rate becomes insufficient to collect funds to make debt payments. Of course, if that was the situation, and residents' home values were dropping, the tax rate increase would not increase the amount residents would be paying in taxes.