Stephenville voters will soon have the opportunity to vote in a bond election to accept or reject the Stephenville ISD’s request to borrow $40,000,000 to build a new stadium. Supporters of the bond issue say that “no tax rate hike” will be needed to meet the ISD’s obligation to repay both the principal and the interest. But that doesn’t mean your taxes won’t go up anyway. Before you vote, you should understand the potential impact on both the tax rate and the tax burden. So let’s look at the rest of the story.
Supporters of the stadium bond issue say that “Taxpayers are not expected to see a tax rate increase from the bond. A few combined factors have put SISD in this position, including the early paying down of debt, low interest rate, and rising property values.”
This is hardly a categorical, iron-clad promise to avoid a tax rate hike. But it’s a fair prediction, no doubt made in good faith, and will probably prove to be true.
But what will also probably prove to be true is that the tax burden will go up, due primarily to “rising property values.” The Stephenville ISD and its supporters evidently believe that the property values will rise enough to generate more tax revenue even if they vote to keep the tax rate constant. And they may well be right. In fact, a writer for another local online news outlet wrote that, “Here’s the best part; the bond proposal will come with a decrease in the tax rate.” She may well prove right too, even though the ISD itself makes no such promise.
But if the ISD Board of Trustees votes to keep the property tax rate the same while property values are rising, it will actually be voting for a tax increase. In fact, depending on how much property values increase, the Trustees could conceivably cut the tax rate and still raise taxes. This will happen if the cut in the rate is smaller than the increase in the property value.
For example, in an ISD with a property tax rate of 1.40/ $100 assessed valuation (a 1.4% tax rate), the owner of property worth $200,000 will have to pay up to $2800 in property taxes. If property taxes climb by, say, 10%, and the ISD Board of Trustees votes to retain the 1.4% property tax rate, his new tax burden will climb to as much as $3080 (1.4% of 220000) unless restrained by age, homestead, and election rollback provisions. But even if the tax rate is cut from 1.4% to, say, 1.3%, while property values still go up 10%, the property owner may be fixed with a tax bill for $2860—a smaller tax hike, to be sure, but still a tax hike, and not a cut. The only way taxes (as opposed to tax rates) can actually be cut is if the rates are cut by more than property values increase.
In fact, state law recognizes the difference between a tax rate hike and a tax hike, and requires that the difference be acknowledged on the ballot itself for the voters to see when they go to the polls. As the ISD acknowledges, “The legislature passed a new law requiring school districts to include the language ‘THIS IS A PROPERTY TAX INCREASE,’ even when the district is not expecting a rate increase. The issuance of new bonds will increase the term on the debt repayment at the current rate. The 2022 bond will not require an increase in the tax rate but will elongate the repayment term at the current rate.”
So if the bond issue passes, the Stephenville ISD will be able to get its new stadium. But the ISD’s obligation to repay its debtors will be a new financial burden which the ISD, and therefore the taxpayers, must bear. The ISD may well be able to avoid a tax rate hike and may actually produce a small tax rate cut. But as it increases its expenditures it must increase its taxes, either by keeping the rates the same or permitting only very small tax rate cuts at best. The chances and opportunities for tax relief produced by big enough tax rate cuts will become smaller. Are the benefits of a new stadium worth the cost in higher taxes needed to pay for it? That’s a question each voter must decide for himself or herself.
Malcolm L. Cross has lived in Stephenville and taught politics and government at Tarleton since 1987. His political and civic activities include service on the Stephenville City Council (2000-2014) and on the Erath County Republican Executive Committee (1990 to the present). He was Mayor Pro Tem of Stephenville from 2008 to 2014. He is a member of St. Luke’s Episcopal Church and the Stephenville Rotary Club, and does volunteer work for the Boy Scouts of America. Views expressed in this column are his and do not reflect those of The Flash as a whole.