Azle ISD Tax Ratification Election (TRE)

  • September 8, 2018 - Azle ISD Voters Approve Tax Ratification Election
    Official Election Results

    The Azle ISD Board of Trustees called a Tax Ratification Election to generate additional revenue for the district while keeping the taxpayers' overall tax rate the same - also called a Penny Swap.

    Azle ISD Election 2018 (video)
    Azle ISD TRE Election 2018 (video)

    Texas school districts' tax rates consist of two separate rates - an Interest and Sinking (I&S) rate and a Maintenance and Operations (M&O) rate. The I&S rate funds the payment of debt from bonds that are used to build and maintain school buildings. The M&O rate funds everything else, including programming, teacher salaries, and utilities. The M&O rate is currently capped at $1.04 per $100 property valuation but can be raised to $1.17 with the community's approval. This is done through a Tax Ratification Election (TRE). If the community passes a TRE, Azle ISD could raise the M&O rate by $0.13 but will lower the I&S rate by $0.13 due to higher valuations and fiscally responsible financing over the years. This would keep the overall tax rate the same as 2017-2018 while providing Azle ISD with $2.5 million in additional net operating revenue.
    tax rate comparisons


    Tax Ratification Election Q & A

    What is a Penny Swap?
    Through a voter-approved swap, Azle ISD would move 13 pennies to the Maintenance and Operations (M&O) tax rate by taking those same 13 pennies from the Interest & Sinking (I&S) tax rate. This move, called a penny swap, would allow the district to keep the total tax rate at $1.329, the same rate it has been since 2017. The tax rates paid by local homeowners will not increase because of the penny swap. However, Azle ISD could see an additional amount annually in state aid.

    What is the difference between a Tax Ratification Election and a Penny Swap?
    A school district can hold a Tax Ratification Election (TRE) when it is asking voters to consider raising the tax rate. Since Azle ISD is asking voters to consider a 13 cent increase to the M&O rate - and will simultaneously decrease the I&S rate by the same 13 cents - this particular TRE can also be called a Penny Swap. For some districts, TREs may result in an increase in the total tax rate; however, the 2018 TRE in Azle ISD will not result in an increase in the total tax rate. The total tax rate will remain the same $1.329 whether the 2018 TRE is approved by voters or not.

    How does a Penny Swap result in more state funding?
    Because the state contributes more funding to M&O pennies, exchanging them from I&S to M&O pennies provides more state money for the same amount of local taxes. By not accessing the additional M&O pennies, the district is not receiving part of the available state funding. Azle ISD receives no state funding for its I&S (debt) pennies, while it can receive much more state funding for its M&O enrichment pennies. Investing Azle ISD tax pennies in M&O pennies brings more state dollars to Azle ISD than investing in debt pennies, while keeping the overall tax rate, M&O + I&S = total tax rate, the same.

    If the Penny Swap is approved by voters, how will Azle ISD use the additional $2.5 million expected in state funding?
    The additional revenue could be spent on:
    *Employee compensation
    *Recruiting quality faculty and staff
    *Student success initiatives including additional instruction
    *Capital expenditures including buses, capital improvements, HVAC, and energy efficiency

    If the Penny Swap is not approved by voters, how will Azle ISD fund projects and salaries that are identified above?
    Even a small cost of living increase for employees may not be an option in future years if the TRE does not pass.

    What will the ballot say on September 8, 2018?
    The ballot will ask voters to approve a total rate, not the M&O rate. The ballot will ask voters to approve a total rate of $1.329 per $100 property valuation. The ballot language is set by state law. Currently, there is not a state requirement to lower the I&S rate, so only the M&O increase is on the ballot. The I&S rate decrease only occurs by the Board passing a local ordinance. On Monday, July 16, 2018, the Azle ISD Board of Trustees approved a resolution approving a decrease in the I&S rate by the same amount as the increase in the M&O rate on the ballot. If the TRE passes, the total tax rate will be the same as last year, $1.329. The TRE will only swap 13 cents from the I&S side to the M&O side. The tax rate of $1.329 will stay the same.

    If the Penny Swap passes on September 8, 2018, is Azle ISD shifting the money from paying on bonds to the day-to-day operations?
    No. No money would be moved from the debt-service fund (I&S) to the daily operations fund (M&O). The increased M&O tax rate will generate more state revenue than the I&S rate, while the bond payments are fixed. The bond payments will not change as a result of the TRE. If the TRE passes, Azle ISD will transfer the amount necessary from the M&O to the I&S fund to make up the funds necessary to pay the debt while earning additional state funding from the M&O tax rate.

    If interest rates rise, would a TRE provide less funds to pay for the debt?
    No, all of the existing debt is already fixed. Azle ISD has no floating or adjustable debt. All payments are fixed at the time of the bond sales. The actual amount of debt is set and does not change, regardless of a TRE. Tax Ratification Elections are intended to result in increased revenue; they don't affect debt in any way.

    Does the proposed TRE take away resources so debt is paid later? What happens if interest rates change?
    The TRE impacts a revenue source and does not affect fixed debt payments. To pay the debt of the Penny Swap, funds are moved from the M&O tax rate to the I&S tax rate so all debt is paid, and the district receives additional M&O funding by increasing the tax rate on the M&O side. Azle ISD's debt payments are fixed, independent of a TRE.

    Is the 13 cent division just for one year, or will it continue after 2018?
    The 13 cent penny swap would continue annually.

    This 13 cent rearrangement will result in approximately a $2.5 million increase in state funding to Azle ISD. Why?
    The state pays more for the M&O pennies than the debt or I&S pennies. Azle ISD did not extend the debt schedule at all. The debt schedule will remain the same.

    Why has Azle ISD not considered a penny swap (through a TRE) before now?
    This is in the best interest of the district at this time. Our tax rate is one of the lowest in the area. This 13 cent swap will allow Azle ISD to generate more revenue without raising tax rates.

    Listed below are districts in our area that have had successful Penny Swaps:
    *Aledo ISD
    *Eagle Mountain-Saginaw ISD
    *Lake Worth ISD
    *Springtown ISD
    *Weatherford ISD

    It's important to note:
    *If the TRE passes, Azle ISD should receive more than $2.5 million in additional state funding.
    *If the TRE does not pass, Azle ISD will not receive additional state funding.
    *The amount of debt payments will not change if a TRE passes or fails.

    When can I vote?
    Early voting is from August 22 to September 4. Election day is Saturday, September 8, 2018. Polling locations are open from 7 a.m. to 7 p.m.

    Where can I vote?
    Early voting and election day voting will both be held at the Azle ISD Administration Building, 300 Roe Street, Azle.

    Azle ISD wants voters to be informed. If you have additional questions about the proposed Penny Swap, please contact the Azle ISD Business Office at 817-444-0805.