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Texas program to help school districts bond debt hits limits

(texas tribune) — A state-backed program that has helped school districts get the lowest interest rates on bonds for decades is nearing its limits.

The Permanent Schools Fund is an approximately $56 billion state fund funded through investments and land tenure. It was founded in 1854 to provide a non-tax revenue source for Texas public schools. Through the Bond Guarantee Program, when a school district passes a bond package, the PSF promises the lenders who purchased the bonds that the state will repay them if the school district is unable to do so. By having the PSF as a guarantor, school districts get the best interest rates on those bonds.

However, PSF’s guarantee program limits the amount of debt that can be covered at any given time. The IRS, which governs tax-exempt municipal bonds, has set the cap at about $117 billion. According to the latest information, as of October 31, there is only about $652.6 million left in the program before the program ends. state forecastThis is down from $3 billion at the end of September.

Amanda Brownson, Executive Director of Policy and Research, Texas Association of School Business Stakeholders, said:

Carolyn Perez, director of communications for the Texas Permanent School Fund, said the TEA is in talks with the IRS about raising restrictions, but no decision has been made yet. The IRS said it could not comment on whether it plans to extend the limits on the PSF’s bond program.

In parliament, members of parliament. Lloyd DoggettD-Austin, and Jody C. ArlingtonR-Lubbock, Submitted House Resolution 9044This will prevent the IRS from setting limits at all.

“The focus here is on minimizing funding costs and maximizing investment in the school,” Doggett said. “Immediate action is required.”

Bryan Woods, head of the North Side Independent School District, said the state’s growing population and student numbers have forced schools to update 10-year-old buildings and raise more bonds to build new ones. The program reached its limit in 2009 as it began to publish.

The IRS updated the program’s debt limits later that year, Brownson said, but not before school districts were forced to pay higher interest rates on their bond debt for months. .

Despite its extension 13 years ago, the program is under threat again. Temple ISD supervisor Bobby Ott said construction costs have continued to rise since 2009 and district leaders prefer to let multiple projects pass in what he calls one package. He said the bond package is getting bigger and more expensive. more.

With voters across the state approving new bonds in the May and November elections, the limits of the program could be reached quickly. Although these bonds have already been approved, they are not guaranteed by the PSF program until they are sold. Also, school districts often wait until construction is ready to find a lender.

For the Austin ISD alone, voters approved $2.44 billion. bond package Update infrastructure across several campuses throughout the district.

In Northside ISD, the state’s fourth-largest school district, based in San Antonio, voters bond package About $1 billion worth of new school renovations and construction. Woods said the district has sold only a portion of those bonds.

This situation has created problems for the district as bond packages have become difficult to sell in recent years.

As districts across the state face protests from some parents over their handling of the pandemic and the way race and history are taught in schools, some voters are pushing bond packages on their ballots. I am expressing my frustration by disabling it. In November, Texas Republican Party Chairman Matt Rinaldi tweeted that people should be “against” any bonds.

Rising property taxes and the cost of essentials have made Texans think twice about voting for bonds that could raise taxes.

Ronald Wilson, chief financial officer of the Hahn ISD north of College Station, said if the PSF’s program hits its limits again and school districts have to pay higher interest rates, they’ll be able to use bonds for new construction projects. is even more unpalatable.

“If you’re talking about having to ask taxpayers for more money, that could make any bond issue a little harder to pass,” he said.

At the Temple ISD, about an hour north of Austin, Ott said the problem is that districts often hand out bond packages that promise not to raise taxes, and if the PSF’s program hits its limits, We said we might have to go back to such a plan. promises, eroding community confidence in the process and making passage of future bond packages difficult.

In May, Temple ISD voters passed a $164.8 million bond package to renovate the school and build a new campus. Ott said the district has sold about $100 million in bonds to start bigger projects.

If the program exceeds the limits and the district is forced to sell the remainder without a PSF guarantee, he said it should discuss with the treasurer what options are best for keeping costs to taxpayers low. said.

Hearne’s chief financial officer, Wilson, said some renovations could stall if the IRS doesn’t raise the cap. Districts are reluctant to propose new bond packages or delay the sale of already approved bonds for fear of tax increases.

“Every time the cost goes up, we have to see if the taxpayer is willing to pay for it. said.

Disclosure: The Texas Association of Schools and Business People is a financial supporter of The Texas Tribune, a non-profit, bipartisan news organization funded in part by donations from its members, foundations and corporate sponsors. Financial backers play no part in Tribune journalism.find the perfect here is a list of them.

This article was first published in the Texas Tribune. www.texastribune.orgThe Texas Tribune is a non-profit, non-partisan media organization that informs and engages Texans on public policy, politics, government, and statewide issues.

https://www.kxan.com/news/texas/texas-program-that-backs-school-districts-bond-debt-is-about-to-reach-its-limit/ Texas program to help school districts bond debt hits limits

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