Regardless of the outcome of this bond election, there is no tax rate increase for taxpayers due to the financial impacts (added property tax base) of Steel Dynamics.
Steel Dynamics, Inc.
On July 22, 2019, Steel Dynamics announced that Sinton, Texas will be the location of their newest and largest steel plant complex. Construction is underway with a projected schedule to be operational by mid-2021.
The new complex will bring nearly 650 new jobs and other supporting businesses to Sinton. This will more than triple the district's certified value, allowing the district to access the full bond proposal amount of $111,060,000 and not raise the current tax rate of $1.4483.
Over the past 15 years, SISD has seen substantial growth in property values, with the tax base doubling at 3% of growth per year. Regardless of additional industry and businesses outside of Steel Dynamics, this growth rate is projected to continue, if not increase.
How am I impacted if the bond is not approved by voters?
Immediately, there is no impact. It will take a couple years for the taxable property value of Steel Dynamics to become available to SISD. We have existing debt and the current tax base will continue to be needed to fund the previously voted-authorized debt. If SISD pursued a similar size election in a few years, there could be a tax rate increase at that time due to the increase of construction costs, nearly 12% inflation rate per year, and we will not have captured the full effect of the taxes Steel Dynamics would have paid over the next few years.
If the bond is approved, how will this not initially result in a tax rate increase on the community?
Regardless of the outcome of this bond election, there is no tax rate increase for taxpayers (added property tax base) due to the financial impacts of Steel Dynamics.SISD does not plan to sell all of the bonds immediately. We are very cognizant of our tax base, so we will only issue the bonds in increments in which the tax base can support without a tax rate increase.
We want to ensure the tax base can support any bonds sold and since Steel Dynamics will take a couple years to generate their full taxable value, it is more prudent to only sell what the tax base can afford in the first couple years.
What risk do we have by adding this bond election to our debt count, especially since one taxpayer is footing most of the bill?
EC&R came into play for SISD back in 2008. At their peak value in 2010, they brought $85 million in taxable value to our roll. At that time, that was 20% of our tax base. While Steel Dynamics is much larger and a higher concentration, what we are recommending will be structured and sold in ways to reduce our reliance on this single taxpayer. Meaning, we will look to allow the tax base to be realized before adding the debt.
PUBLIC SCHOOL FINANCE
A school district's budget is generated from three sources: federal, state, and local funding.
Local funding from property taxes makes up the largest source for school districts.
A school district's total tax rate is made up of two parts: the maintenance and operations (M&O) rate and the interest and sinking (I&S) rate. Each has a designated purpose and budget.
M&O Tax Rate vs. I&S Tax Rate:
The M&O budget is used for daily operations of the district, including utilities, salaries,
furniture, supplies, food, and gas.
The I&S budget is used to repay debt for capital improvements through voter-approved bonds. These improvements include new construction, renovations, HVAC and roofing replacements, land purchase, furniture, and technology.
Bond elections only affect the I&S tax rate. Funds from a bond CANNOT be used as part of the M&O budget or to increase salaries.
NEW STATE LAW REQUIREMENT
"Property Tax Increase" Language on Ballots
In accordance with the new state law, effective September 2019, all ballot propositions must include the following statement: THIS IS A PROPERTY TAX INCREASE regardless of no tax rate increase. Voters will see this language on both propositions; however, the Sinton ISD tax rate will not increase as a result of the 2020 bond election. Based upon the current taxable values of the district and projected growth, it is expected that the I&S rate will remain at $0.45 following the election.
Property Tax Rate vs. District Tax Rate
Your property taxes are locally assessed taxes determined by numerous taxing units and the county appraisal district.
Various local taxing units (LTU)*, including the school district, establish individual budgets and tax rates which, combined with the appraised value of your home, make up your overall property tax rate amount.
Your home appraisal value typically changes yearly and is set by the San Patricio County Appraisal District. Sinton ISD has no authority on your home appraisal value and cannot raise or lower your appraised value.
*Local taxing units include city, county, school and special services such as community college, hospital and road.
Again, this additional language is a new state law requirement. The district's school tax rate will not be increasing. Once bonds are approved, they are viable for the next ten years and can be sold in increments. We will only sell bonds as they are needed in the amount needed. Have further questions? Submit them here.