Houston ISD's $4.4B school bond proposal wouldn't raise taxes if passed. How does that work?

By Megan Menchaca, Staff writer June 20, 2024

Houston ISD is preparing to put a $4.4 billion school bond proposal on the ballot in November that the district says will not raise taxes if approved.

Although the bond package to improve the district’s school facilities and infrastructure would be the largest in Texas history, the district says it would be able to implement the proposal without raising taxes, assuming it receives approval from the appointed Board of Managers and voters later this year.

Here’s what you need to know about how the bond would affect your taxes if passed:

What’s in HISD’s current school bond proposal?

The largest portion of the bond — more than $2 billion — would go to rebuilding, renovating and modernizing schools with “poor facilities and learning conditions,” with a focus primarily on elementary and middle schools. More than 40 campuses would receive significant overhauls, according to the bond plan.

The district would spend $1.35 billion on health and safety improvements, including updating heating, ventilation and air conditioning systems, removing lead from drinking water and enhancing security infrastructure. It would allocate $1 billion to expanding access to technology, early childhood education and career and technical education centers.

What is HISD’s current tax rate? What does it fund?

The district currently has a tax rate of $0.8683 per $100 of taxable value, with $0.7016 for maintenance and operations and $0.1667 for debt-service, which is known as the interest and sinking rate.

M&O taxes pay for employee salaries, supplies, instructional materials, utility costs and other expenses associated with running the school district. I&S rates, however, can only be used to repay principal and interest payments on bond debt related to school construction and facilities.

Texas school districts must obtain voter approval to take on additional debt and increase the I&S rate, which is done through a school bond election. HISD last passed a school bond in 2012, where about two-thirds of voters voted in favor of the $1.9 billion proposal. That bond also advertised as having no tax increase.

Why is HISD saying the school bond wouldn’t increase taxes if approved?

According to HISD’s 2024-25 budget presentation, the district’s long-term debt obligations from previous school bonds will decline to close to nearly zero by 2043 if it does not take on additional debt. If the debt obligations did not change, HISD would eventually have to lower its I&S tax rate, which has remained the same for the past six years.

However, if the bond passed, the district would instead be able to take on new debt and continue to maintain its current I&S tax rate of $0.1667. HISD wrote on its website that independent financial forecasts show that it can borrow at least $4.4 billion without having to raise its tax rate.

HISD also received a AAA bond rating — the highest rating — from Moody’s Investors Service, which is a global credit rating agency. According to the district, this rating will allow it to partner with the Texas Permanent School Fund and borrow debt at a lower cost and interest rate if voters approve the bond.

Why will the language on the ballot, if approved, call the bond a tax increase?

Texas state lawmakers passed House Bill 3 in 2019, which requires school districts to add “This is a property tax increase” to all bond election ballots, even if the bond wouldn’t increase the tax rate if passed.

The language reflects that Texas taxpayers will have a higher property tax rate with the passage of a school bond than they would if a bond did not pass. They may end up paying a larger amount of taxes in the future if the value of their property increases, even if the overall tax rate stays the same.