Tax Base Growth Allows Northwest ISD to Issue Bonds with No Tax Rate Increase
Tax Base Growth Allows Northwest ISD to Issue Bonds with No Tax Rate Increase
Posted on 03/04/2021
This is the image for the news article titled Tax Base Growth Allows Northwest ISD to Issue Bonds with No Tax Rate Increase Immense growth in residential and commercial development within Northwest ISD has made room for the district to issue new bonds with no change to the current tax rate, according to financial advisers. 

Jeff Robert, who has worked with Northwest ISD as a financial adviser for more than 20 years, explains that the district’s debt is repaid using the Interest and Sinking tax rate of $0.42 per $100 valuation. 

That amount was set in August 2020 when the Board of Trustees lowered the rate from $0.45 per $100 valuation. At the time, trustees said they could lower the rate because of the growth in the area.

And demographers say that growth isn’t slowing down anytime soon. 

Public school taxes involve two figures, which divide the school district’s budget into two “buckets.” The first bucket is the Maintenance and Operations (M&O) budget, which funds daily costs and recurring expenditures such as teacher and staff salaries, supplies, food, gas and utilities.


Beginning in 2019-2020, the Texas legislature capped the amount of maintenance and operations funds school districts can keep from growth at 2.5 percent through House Bill 3. Prior to that, Northwest ISD had seen more than 10 percent growth annually. 

M&O funds above the 2.5 percent cap are subject to Chapter 49 recapture laws (Robin Hood) and are sent back to state coffers.  

The second bucket is the Interest and Sinking (I&S) budget, which is used to repay debt for longer-term capital improvements approved by voters through bond elections. 

Proceeds from a bond issue can be used for the construction and renovation of facilities, the acquisition of land and the purchase of capital items such as equipment, technology and transportation. I&S funds cannot by law be used to pay M&O expenses, which means that voter-approved bonds cannot be used to increase teacher salaries or pay rising costs for utilities and services.  

I&S funds from growth are not subject to the Chapter 49 recapture (Robin Hood) laws and stay within the district, which allows Northwest ISD to be able to repay debt without raising the tax rate. 

“Within the maintenance and operations budget, there’s very little room for a district to be able to save enough money in order to fund large-scale projects,” Robert said. 

That’s where the I&S funds come in, Robert explained. 


“Every district in the state of Texas that is looking at a large-scale capital program is utilizing their I&S tax rate in order to make the payments on those bonds associated with that,” he said. “And in order to even be able to issue bonds, they must go to their voters and receive approval to allow them to issue the bonds.”

Compared to other fast-growth districts in North Texas, NISD has the lowest overall tax rate ($1.3363), largest geographic area (234 square miles) and greatest potential for growth (25 percent built out). A table comparing school district tax rates can be viewed at https://www.nisdtxbond.org/tax-info

Denton ISD, which has about 5,900 more students than NISD, has an I&S tax rate of $0.48 and a total tax rate of $1.4066 per $100 valuation.

Eagle Mountain-Saginaw ISD, which has about 4,500 less students than NISD, has an I&S tax rate of $0.45 and a total tax rate of $1.4964 per $100 valuation. 

For more information on Northwest ISD’s tax rate and the May 2021 bond, visit nisdtxbond.org.