Property Taxes, Part 2

by Coy Holcombe.  

Yesterday, we talked about exemptions and how to calculate property taxes on a homestead. In our calculations, we used the figure $1.258/100 as our tax rate. This is the adopted tax rate for the 08-09 fiscal year. This tax rate is made up of two parts: the maintenance and operations (M & O) part and the interest and sinking (I & S) part. For 08-09 the M & O rate is $1.04/100 and the I & S rate is $0.218/100. These two components of the overall tax rate serve two completely different functions.

The maintenance and operation rate provides funds for the daily operations of the school district. The money generated through the M & O rate is used to pay for salaries, supplies, travel, and the various costs associated with the day to day operation of the district (such as utilities).  The amount of tax revenue generated under the M & O rate also earns the district additional state aid. This additional state aid is commonly referred to as Tier II funds. For the 08-09 school year, we are estimating that the district will earn approximately $770,000 in Tier II aid.

The interest and sinking portion of the tax rate is used to pay for the voter approved bonds of the district. Currently, the district is paying for three different bond packages: the bonds that were sold to build the Intermediate School, the bonds that were sold to do the recent renovations and additions at all campuses, and the bonds that were sold to build the new competition gym. At the start of the 08-09 school year, our unpaid principal balance for our bonds was $14,285,000. Currently, our total bond payment is slightly over $1,000,000. The district also receives some state aid to help pay for our bonds. We will receive approximately $133,000 from the state through the existing debt allotment (EDA). As with Tier II funds under M & O, the existing debt allotment can increase based on the tax effort of the district.

For 08-09, the board voted to use approximately $28,000 of fund balance from our I & S fund to help pay for our bond payments. This use of fund balance helped the district actually lower the I & S rate by a little more than a penny from last year (last year’s overall tax rate was $1.26804 compared to this year’s tax rate of $1.258).

While tax rates and state aid can seem fairly confusing at times, I want everyone to know where our taxes are going and how the system works. If you have any questions concerning tax rates or state aid, please do not hesitate to contact me at cholcombe@eustaceisd.net.

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