School boards grapple with next year's taxes

MISSION – The school board here may soon join a growing list of Hidalgo County districts eyeing a complex tax maneuver that would help thwart state budget cuts next year but could lead to future tax hikes.

Voters would first have to approve the so-called tax swap, which does not increase a district’s current tax rate and simply transfers a portion of the debt service rate to the maintenance and operations side. The move forces the state to fork over millions in additional education dollars to the district.

The Mission district — which faces a $5.7 million cut next year — could end up banking $7.6 million.

“Now, this sounds too good to be true,” said John Walch, a consultant who helps districts clinch the required tax ratification election.

“Instead of losing money this year, (Mission) can offset state cuts,” he said. “It’s not going to cost taxpayers a single penny. All we need is voter approval.”

Last fall, Donna and La Joya voters OK’d the swap and secured more than $20 million combined for their schools’ day-to-day operations.

And so far, the Sharyland and Pharr-San Juan-Alamo school districts have made tentative steps to ask voters for a swap this fall, while Edinburg has expressed some interest, Walch said.

However, the already-complicated maneuver is not so cut and dry.

“If we don’t do it, we’re leaving $7.6 million on the table,” Mission Superintendent Cornelio Gonzalez explained. But “the amount that we make up from the swap decreases ... unless you increase the tax rate.

“Over time, the board is going to have the discretion to increase” taxes without voter approval, he said.

Next year, Mission would collect an extra $7.2 million because of the swap. But that amount decreases incrementally to $2 million by the 2016-17 school year.

Moreover, a now-lowered debt service tax rate would result in decreased collections meant to pay off a district’s bonded indebtedness, forcing school boards to dip into their “rainy day” fund balances to cover the difference.

In Mission’s case, that gap would be just $1.8 million — “minimal,” as Walch described it.

But that difference would jump to $4.2 million by the 2013-14 school year and to more than $5 million the following two years.

At that point, a district can continue consuming its cash reserves, or boards can quietly approve higher debt service tax rates, without any voter approval, as provided under their last bond election.

“That’s why I’m not 100 percent sold on this,” Mission Board President James Olivarez said. “We need to ask more questions, take the time to actually consider what voters expect before we make this big decision.

“It does look like the right thing to do, but now that I know which other players are considering the same thing, we might all be on the same page,” he added. “We may not have to go through with all the cuts.”

The deadlines are tight, however, if Olivarez and other county trustees want to call tax ratification elections seeking voter approval for the swaps.

Walch said he prefers putting the issue up for vote in September rather than tacking it on to a crowded and confusing November ballot. But to do so, boards must adopt the new tax rates by early August.

If enough districts begin asking voters to approve the same thing, it might benefit them all, Mission Trustee Oscar Martinez said.

“That’s critical,” he said. “We can piggyback on these other districts (and) convince voters together.”

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Neal Morton covers education and general assignments for The Monitor. He can be reached at (956) 683-4472.