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AISD bond election: Shedding some light on the “benefits.”

2014-04-25-3b

Friday, April 25, 2014 by Steve Israel

This is the second of two articles that share my thoughts and perspective regarding the upcoming $661 million AISD bond election.

This article addresses how the ever increasing tax revenue of the AISD is actually sufficient to pay for the items proposed in the subject bond issue and sheds some light on the benefits the Yes crowd is claiming the proposed spending will yield.

You may argue that the money is not available in the budget to pay for the subject items. I disagree. The school district’s revenue is based on a tax that is a percentage of home values in the district. Recently home values have increased well in excess of inflation. As well, over the past twenty years, taking into account economic recessions, Arlington home values have out-paced inflation. Therefore, the tax revenue to the school district has out-paced inflation. Additionally, bond debt has increased steadily over the last decade. The associated tax increases and revenue was added to the operating budget; so where has the revenue gone? I don’t know specifically but it’s a good question to ask. It’s gone into the AISD’s operating budget and an insufficient amount has been designated to pay for the items proposed in the subject bond issue based on an appropriate construction/replacement schedule.

The proponents of the bond issue and, corresponding tax increase, are advocating that adding debt is not a big deal since the AISD’s debt and taxes are below that of its peer group; similar size school districts in Texas. Currently the AISD is in reasonable decent financial shape. If the $661 million bond issue is approved, AISD’s bond debt will total $1.1 billion and be at the top of comparable districts; second only to Katy, TX ISD at $1.3 billion. Is that something to be proud of? I think not. The financial health and lower tax rate of the district is something to be proud of and should be vigilantly guarded and maintained, not used as a justification to take on $661 million of debt and raise taxes. Why in the world would the AISD take on additional debt just to be like everyone else? It’s something politicians and government officials advocate but is an argument I’ll never understand. The proponents are using this argument. But I estimate it is a foreign concept to most families and, I bet, to them if they would stop and apply the concept personally. If they would do that, take on some personal debt so they can be like everyone else, I propose they borrow money and give it to the AISD so my taxes aren’t increased.

Instead of taking on more debt, I believe the Trustees should do everything within their ability to eliminate unnecessary and discretionary spending, repay the current bond debt, and guard the financial security of the school district. If they had done this over the last decade, instead of increasing AISD’s operating budget to match the ever increasing tax revenue, which remember has out-paced inflation, there would be plenty of money to pay for the subject items without additional debt and a tax increase.

Regarding AISD’s lower tax rate compared to its peer group. Just because other districts have higher tax rates does not justify approving a tax increase to keep up? Again, the argument is a mystery to me and quite frankly a bit absurd. In 2013 between, federal income taxes, social security taxes, Medicare taxes, property taxes, utility taxes, gas taxes, sales taxes and miscellaneous government fees, I paid 40% of my income in taxes. I cannot be convinced that I’m under-taxed. If not for charitable contribution far above the national average for my income level the percentage would have been 45%. I don’t disclose this to pat myself on the back. I do it to dispel the potential accusation that I’m just another cold-hearted, money-grubbing conservative who could care less about those less fortunate. My calendar and check book prove otherwise.

An argument the proponents are making is this bond debt and associated improvement in the schools will improve property values. This argument has been dispelled by historical results to many times to maintain any credibility. There is absolutely no historical evidence whatsoever that government debt and tax increases, regardless of what its purpose, has increased the value of anything. I would challenge anyone to prove otherwise. It’s actually the opposite. When money is taken from the American public via taxes they have less money to spend, investment decreases, the overall economy slows and fewer jobs are created; thus values of everything decline. It’s a fundamental macro-economic principle. Further, increased government debt creates a future financial burden that at some point has to be confronted. When that day arrives it’s not a pleasant time. What further complicates this eventual day of reckoning is the people that created the mess are the same ones that are in charge of fixing it. This has proven to be disastrous too many times.

If the proposed improvements will increase property values, I would challenge the proponents to provide the quantitative method they are using to arrive at this conclusion. I’m not aware of any such calculation. Real estate values are driven by the overall economy and supply and demand. During the 2008-2011 financial crisis home values across the country, including Texas, decreased substantially. The Texas economy is more diversified and weathered the downturn better those most parts of the country. Further, due to favorable business conditions, the population of North Texas continues to grow, creating housing demand in North Texas and, as such, home values bounced back fairly quickly and are increasing above the rate of inflation. If school improvements increase real estate values, then why did the $180 million bond issue five years ago, and associated AISD improvements, not increase or prop up home values during the financial crisis? It was because the economy was in a tail spin and real estate values nose-dived. Again, real estate values fluctuate with the overall economy and supply and demand, not by adding government sector debt and increasing taxes.

One final thought regarding home values, spending and financial management. A few years ago the principal of Pope elementary let approximately 100 children from East Fort Worth enroll in the school. A town hall meeting was called to get to the bottom of why this happen and what was being done about it. The principal and the administration did everything but answer the question. It was a politically masterful performance, aided and abetted by many city leaders. As such, the principal’s decision stood without consequence or action by the administration. This decision created a need for additional funds to operate the school; additional teachers, etc. To partially offset this need, the school applied for and was granted Title I status. However, the Title I money was insufficient to pay the added cost to educate these children. As a side note, research has concluded that Title I status hurts property values in the surrounding neighborhoods. This may be an isolated incident, but why are some principals and the administration allowed to violate enrollment policy, something that added cost with no corresponding revenue increase, but then ask Arlington residents to vote yes to a tax increase. Sounds fairly irresponsible to me.

In conclusion, is there a solution? Sure, it’s easy. Vote no to bond debt totaling $1.1 billion and require the Trustees to reduce spending and use that money to pay for the subject items overtime. It’s something we do as individuals and families, why not hold the Trustees to the same standard?

Part One  “AISD bond election: Spending on education, how bonds work and financial mismanagement.”

One Response to AISD bond election: Shedding some light on the “benefits.”

  1. buddy

    April 25, 2014 at 5:08 pm

    Thank you, Steve. Again, another well-reasoned piece. Where are the Pro side’s well-reasoned arguments favoring the $661 million bond deal? There aren’t any. Is it because no good Pro arguments exist?

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