Interest & Sinking Tax Rate and Principal Paydown Commentary

I&S Tax Rate and Principal Paydown Commentary

According to the Texas Education Agency (TEA), the following districts are the ten fastest growing in the state over the last five school years. Katy ISD currently has over 96,000 students and our demographers expect the enrollment to grow to 103,000 by the year 2034.

District	5 Year Enrollment Increase
Tomball ISD		5,311
Comal ISD		5,328
Cleveland ISD		5,386
Forney ISD	5,722
Frisco ISD	6,516
Northwest ISD	6,595
Conroe ISD	9,326
Lamar CISD	11,068
Prosper ISD	14,119
Katy ISD	14,872

As one of the fastest growing districts in the State of Texas today and over the last 25+ years, Katy ISD has never had an Interest and Sinking (I&S) Tax Rate above $0.40 and has been able to successfully construct and maintain the facilities and projects necessary to educate over 96,000 students every day.
Calculated Interest & Sinking Tax Rate projections with a successful 2023 bond election were communicated to the Katy ISD Community Bond Advisory Committee (CBAC) in March 2023.
As Chief Financial Officer (CFO) of Katy ISD, I communicated to the Community Bond Advisory Council (CBAC) that my recommendation would be to continue to maintain the current $0.39 I&S tax rate even if the bond election were not held or did not pass so that Katy ISD could continue to pay down bond principal and interest early to save on future interest costs for Katy ISD taxpayers.
Since August 2017, Katy ISD has pre-paid $87,150,000 in principal which reduced interest payments by $25,412,766 for a total principal and interest reduction of $112,562,766.
In addition to saving Katy ISD taxpayers future interest costs, paying down principal and interest early helps the district’s bond ratings, which directly impact the interest rates on Katy ISD bond issuances. More favorable bond ratings result in additional savings for Katy ISD taxpayers.
The debt “burden” is not only placed on existing taxpayers but also shared with new and future Katy ISD residents. Katy ISD’s taxable values have grown as housing units and new business establishments have increased to accommodate the increased population. This growth is primarily due to people moving to Katy for the schools. Steady growth in taxable values have allowed the district to sustain bond payments at the $0.39 I&S Tax Rate.
The increase in homestead exemption from $40,000 to 100,000, passed in November 2023, is a good thing for taxpayers and it also impacts our ability to fund future bond authorizations without increasing the I&S Tax Rate. Maintaining a stable tax rate effectively levels taxes for current and future taxpayers, while saving taxpayers in overall debt burden.