McKinney ISD TRE: A Realtor Viewpoint

Sandy Jendal, a McKinney Realtor sent this to me and I though it was worth passing on.

Early voting for the TRE has now ended but for all MISD Residents who are still undecided on how to vote, there is still time on election day Saturday September 21, 2013, to cast your vote.  Before you do, please consider these facts:

MISD Statement 1:  MISD posed the question, Does McKinney ISD have an alternative option to holding the TRE?  The question to MISD that taxpayers should be asking is,” Why doesn’t the District propose a lower rate than the highest allowable $1.17 rate?

Fact:  State funding laws maximize the revenue each District receives if the District M&O tax rates are between $1.00 to $1.06, MISD is $1.04.  The $.06 pennies over $1.00, also known as “golden pennies”, generate the highest level of guaranteed supplemental funding up to $59.97/per Student Weighted Daily Average Daily Attendance(WADA)/per Penny.   In other words, each penny generates additional revenue that the District keeps up to this $59.97 level.  Any district revenues realized above this level are “recaptured” by the State and distributed to poorer school districts; this wealth equalization is also known as “Robin Hood”.   MISD participates in this funding and receives some benefit since we have an M&O tax rate of $1.04, however, MISD is not maximizing this level of funding by leaving an additional $.02 of guaranteed funded revenue on the table.   By raising the tax rate to the highest level allowed by law, it will increase the rate at which the State will recapture and redistribute our tax dollars to poorer districts.  FYI – Each penny over an M&O rate of $1.04 requires voter approval; so the question MISD needs to answer, Does MISD really need the entire tax increase or is MISD raising the rate to the limit only because they don’t want to goes through this process again?

MISD Statement 2:  MISD claims the TRE will add an additional annual increase of $269.10 for an average MISD home with a $222,000 appraised value and a homeowner’s exemption.

Fact:  The total TRE tax impact for the average MISD home in 2013 will be $489 since this home increased in market value $220 from the previous year.  At the increased TRE rate, this same homeowner can expect to see their 2014 taxes increase an additional $344 to $458 over the previous year based on market projections for MISD average home values. 

MISD Statement 3:  MISD claims that in 2007 HB1 was passed that held all Texas schools to a constant amount of revenue per student “target revenue” and that the funding was based on 2005-2006 data.  Therefore, the district has not seen substantial increases in funding since this time.

Fact:  Property taxes were reduced in 2006 from a rate of $1.50 to $1.00 for most school districts, including MISD.  HB1 was passed in 2006 as a way to help districts replace the lost revenue that the districts would have received at the higher tax rate with State funds.  Minimum target revenues were established at that time based on a districts student Weighted Average Daily Attendance (WADA).  These numbers fluctuate every year based on the number of students in attendance.   Every year, since 2007, the State made the Districts whole by replacing lost revenue for those Districts that needed state aid.  The law was modified in 2009 and again in 2011. The State continues to make Districts whole up to the minimum revenue target for the district.  The minimum revenue that MISD can expect in 2014/2015 is anticipated to be at the same level as this year, $154.3M, assuming that student population stays constant, however, it is entirely possible that MISD property tax revenues in 2014 will exceed the minimum revenue targets enough to cover much of the MISD proposed budget shortfall in 2014/2015.

MISD Statement 4:   The State cut MISD funding by 11.2M in 2011/2012 and an additional amount of 4.5M in 2012/2013.

Fact:  The state legislature modified funding formulas beginning in 2009/2010 which effectively lowered the funding rates for school revenues that all districts would have lost in school year 2009/2010.  In 2009/2010, MISD was not negatively impacted as the minimum target revenue amount increased over the previous year.

In 2010/2011, the State adjusted for transportation charges for the current year and increased the revenue WADA factor from $120 to $350.  Again, no negative impact to MISD as the minimum revenue target significantly increased.

In 2011/2012, the State added a factor that reduced the minimum target revenue and repealed the provision that limited increase to $350 per WADA.  In addition, the funding laws were modified again, restoring some of the funding For MISD in 2012/2013.  The net effect for MISD over this two year period reduced the amount of funding that MISD would have received had the funding laws not been modified in 2011.  This revision affected all Districts that rely on additional State Aid to meet minimum target levels.  Districts whose property tax revenues exceeded the minimum target levels may not have felt the impact of 2011 funding changes.

MISD Statement 5:  MISD states that the funding formulas allow for no inflationary cost, but the district continues to experience rising costs in salaries (to remain competitive with peer districts), transportation and other costs.

Fact :  Each year the state helps by providing  funding for Educator Salaries and Staff employee increases.    Back in 2008/2009 there was a mandatory Educator Salary increase, each year since, funding is provided by state and local taxes to cover this salary increase.  The amount of funding for the Educator increase for MISD in 2013/2014 is $580,061 and is covered either by our own tax collection or by the State every year if minimum revenue requirements for the district are not met.  In addition, there is an allotment for full and part time staff employees, provided MISD’s funding.    The amount of funding here is directly proportional to the number of students in attendance in a given year.    The amount of revenue for increases in staff salary for MISD this year is $317,104Total Educator and Staff increases are $.9M this year.

There are also transportation allotments.  This allotment is based on a set rate per mile that is based on the linear density of the districts eligible school bus route miles.  Each year, funding is provided for transportation and since 2009, the State makes adjustments for current year transportation funding.  In 2012/2013, the State provided an additional $352,145 in transportation funding over the allotted $1.9M.  This year, the funding for transportation is $1.9M.

MISD Statement 6:   Projected MISD Revenue is graphically depicted to decline over time.

Fact:  MISD does not have a crystal ball.  Property tax values have been increasing beginning in 2011, continuing through 2013 and are estimated to keep rising over the next 8 years.  This is according to experts in the real-estate industry.     Since many fortune 400 companies are relocating their headquarters to TX, McKinney included, the projected influx of buyers will sustain growth in TX for at least another 8 years.  Further, MISD can’t project what future legislation lies ahead that might change funding laws in either a positive or negative direction.  The next legislature session that could affect funding will be in 2015.  In the near future, as property tax revenue increases to a point where they exceed the MISD minimum revenue target, this additional revenue will continue to fund the MISD budget.

MISD Statement 7:  Over 65 and disabled whose taxes are frozen will not experience any tax increase if the TRE passes.

Fact:  This assumes that over 65 and disabled have applied to have their taxes frozen.  As with all exemptions, homeowners ,over 65 and disabled exemptions, as well as tax freezes, the homeowner needs to apply to the Collin County Appraisal District to receive these benefits as they are not automatically given to any homeowner.

MISD Statement 8:  If the TRE does not pass, the district would need to cut an additional $10.7M from the 2014-15 budget.   Reductions in programs such as CTE and Gifted and Talented could be affected, as well as other non-mandated courses.

Fact:  Programs such as Career and Technical Education (CTE) and Gifted and Talented (GT) are funded though our State and Local taxes.  If these programs are reduced or eliminated, the funds allocated to these programs are reduced or disappear since funding is based on the number of students enrolled.    For 2013/2014 MISD’s allotment is $5.3M for CTE and $.7M for the GT program.  Any decrease in enrollment will reduce the total amount of MISD’s minimum revenue target and funds received from the State.

In conclusion, the outlook for McKinney is certainly bright as more businesses makes McKinney their  home, if fact, on Friday the 13th  in a special Realtor event , Mayor Brian Loughmiller presented new businesses that are re-locating to McKinney.  This list includes, Raytheon HQ for their SAS Division, Wistron Green Tech HQ, Emerson Distribution HQ, Traxxas HQ, and Encore Wire Expansion.  Per the Mayor, the city is actively recruiting more businesses to locate their operations here to McKinney.   Further, there are plans for a hotel and conference center at the NE corner of 121 & Hwy 75 with an expected completion date of 2/2015.  In addition, the NW corner of McKinney is currently being considered as a commercial corridor.

As we will continue to see our property values increase year-over-year, it would be a shame to tax homeowners to the point where they can no longer afford to maintain their homes to the standards of other near-by community properties, and even be forced to sell and relocate to a lower tax district communities.

Sandy Jendal can be contacted at Sandy@BrightStarTXHomes.com

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