GCISD BOND INITIATIVES FACTS
GCISD receives no State funding for facilities or capital improvements. The Texas Legislature has chosen to fund facilities and capital improvements through local taxpayers. Accordingly, below we provide pertinent facts about GCISD bond programs, the financial management of the district related to voter approved bonds and the district’s transparency on these subjects.
Summary Statement of Facts
Each of the following statements is explained and supported with facts in more detail below.
GCISD was transparent with voters about the district’s debt prior to the 2016 Bond Election. The District’s financial statements include such information and are always available online for taxpayer review.
GCISD has effectively managed its debt and routinely worked to reduce the cost of voter approved bonds. While the State of Texas has not provided any funding to GCISD taxpayers for facilities and capital improvements, the District has refunded and refinanced bonds to lower the overall cost to the community.
GCISD is recognized for its superior financial management. According to Moody’s Investor Service, a renowned and independent national credit rating reporting agency, GCISD has a Aa1 Rating, which is the second to the highest rating possible.
GCISD employed a uniquely transparent and open process that was lengthy, deliberative and interactive to determine the 2016 bond initiative. More than 50 community stakeholders were involved, many of whom made critical and substantive recommendations that were incorporated into the final bond initiative. The District video recorded those meetings and placed them on a website dedicated to the process and of continually providing information to taxpayers. Information was always available to all taxpayers during the seven-month process.
GCISD was transparent with voters about the proposed tax rate associated with the 2016 Bond program. Using the District’s website and in many public meetings specific to the bond initiative, the District informed voters that the estimated cost would be $0.1281 (12.81 cents). As a result of efficient financial management, the actual cost is $0.0766 (7.66 cents).
GCISD was prudent in setting the repayment structure of the bond initiative. Initial principal payments ensure items are paid before their useful life ends. For example, GCISD structured bonds, associated with short-term assets like technology, to be fully paid in five years and school buses in seven years. (A school bus lasts 12-15 years and longer.) Bonds associated with long-term renovations and new construction is structured to be fully paid in 25 years or less.
COMPREHENSIVE SUPPORTING ELEMENTS
Transparent Communication About Debt Prior to 2016 Bond Election
GCISD was transparent in communicating its debt level prior to the 2016 bond election, as noted in the Frequently Asked Questions that were on the 2016 Bond website and continue to be on the bond website.
Additionally, GCISD always posts all financial statements on the GCISD website under Financial Services. For example, prior to the 2016 bond election, the 2015 financial statement also showed the District’s outstanding bond principal and interest.
The District has maintained transparent communication related to GCISD’s Bond initiatives since 2011 to keep the community and voters well informed with regard to previous voter approved bond programs.
Outstanding Financial Management to Reduce the Cost of Bonds
As a part of the annual budget process, GCISD always considers the prepayment of existing bonds to reduce the future interest cost of the bonds. Over the last 14 years, GCISD has exercised efficient financial management through the refunding and refinancing of bonds resulting in a savings of $76.8 million in interest cost. Most recently, in April 2016, GCISD refinanced eligible bonds which saved $14.6 million in bond interest cost to taxpayers. In August 2017, GCISD prepaid $10 million in bonds, which saved $15 million in future interest costs. Additional bonds will become eligible for refunding in the near future.
GCISD’s Superior Financial Management Indicated by Its Credit Rating from Nationally Recognized Agencies
The highest credit rating obtainable from Moody’s Investors Services is Aaa. GCISD has the second highest rating possible; that of Aa1. That rating is earned through a variety of indicators and clearly points to GCISD’s strong financial health as determined by an independent national evaluation.
The District maintains independent ratings from nationally recognized credit rating agencies, such as Moody’s Investors Service and S&P Global Ratings, that evaluate the District’s financial strength and its ability to pay its existing bonds.
One of the indicators creditors use to determine credit rating is the evaluation of debt to property value ratio (Debt/Property Values)
In the 2015, the State average of debt to property value ratio was 3.28%, while GCISD’s was lower at 2.93%.
In July 14, 2017, after the passage of the 2016 Bond Program, Moody’s upgraded the District’s credit from Aa2 to Aa1. Again, the highest credit rating obtainable is Aaa. GCISD has the second highest rating possible; that of Aa1.
Even after the issuance of the bonds, the current GCISD debt service ratio of outstanding principal to property values is 3.0%, which is below the 2017 State average of 3.23%.
The chart below illustrates how GCISD currently compares to other non-fast growth DFW school districts. Again, GCISD is below both the State average ratio and the ratio of DFW area non-fast growth school districts:
Clear Communication to Voters About the Proposed Tax Rate Associated with the May 2016 Bond Election
Prior to the election, the GCISD debt service tax rate was $0.2801. As part of presentations to the community on the proposed May 2016 bond election, the district projected a tax rate increase of $0.1281 that when added to the then existing rate of $0.2801 would result in a projected rate of $0.4082. Through efficient financial management, the actual tax rate increase is $0.0766. Therefore, the property tax rate needed to generate the revenue required to service this bond debt issue is $0.3567. This results in implementation of the bond initiative at a cost that is 40.2% less than projected and a savings on interest cost of $84.9 million from the original projection.
Even with the passage of the 2016 bond election, GCISD still ranks 43 out of 69 of North Texas school districts in relation to the debt service tax rate as shown below. Additionally, the District used increasing property values to pay down debt while implementing the new bond program at a much lower cost.
To see how the district compared to other districts in relation to the total tax rate, please refer to the chart below:
Community Involvement in the 2016 Bond Initiative & Transparent Process Made Available to all Taxpayers
When contemplating the prospective need for an additional bond issue to provide funding for capital improvements and GCISD facility upgrades, in July 2015, the Facility Innovation and Readiness Stakeholder Team (“FIRST”) was formed. When developing membership of FIRST, the district sought recommendations from the business community through the Chambers of Commerce, civic organizations, school principals and an invitation for any interested community member to submit an application. The district received eight applications from interested community members and four served on FIRST.
In addition to the 34 community members, 25 staff members, many of whom are also GCISD taxpayers and parents, were invited to serve on FIRST. These 59 committee members then engaged in an exhaustive, comprehensive seven-month assessment and analysis of prospective capital improvements, new construction and facility upgrade needs and costs. During this time, FIRST members received feedback through Let’s Talk, an online feedback system, and personal conversations with community members.
On February8, 2016, after seven months of open and transparent public meetings, FIRST concluded its deliberations and presented its recommended bond package to GCISD Trustees. The initial recommended bond proposal totaled $257.9 million. After the Board of Trustees deliberated on the proposed package, they asked members of FIRST and the Administration to refine the package so as to bring down the overall amount to under $250 million without compromising the priorities of the FIRST, FIRST was successful in meeting the goal and ultimately, on February 18, 2016, GCISD Trustees approved to call a $248.975 million bond election.
Finally, FIRST was transparent in the process and its consideration of potential projects and the GCISD Board of Trustees was transparent with regard to publicly disclosing the prospective cost of the 2016 Bond Initiative.
Financial Standing on Voter Approved Bonds After the 2016 Bond Election
Currently, the District has an outstanding principal of $438 million and $250.7 million in interest. This is the result of the District issuing $188.6 million in bonds in August 2016. The remaining $60.3 million in bonds will be issued at a later date but will not result in a debt service tax rate increase.
GCISD has structured bonds to be fully paid in 25 years or less. Unlike mortgages, the district is paying a large portion of the principal upfront, which reduces interest costs.
GCISD has also structured bonds to repay technology and equipment within the estimated useful life of the assets. In other words, the district is not paying on bonds for 25 years for an item that has a useful life of five to seven years. For example, the payment schedule for the 2016 bond series included a principal payment in August 2017 of $7.7 million. This almost covered the total cost of student and teacher devices purchased during the 2016-2017 fiscal year, meaning GCISD was able to use bonds to get technology devices into the hands of students and teachers and pay it off within one year. Given that GCISD is a “Robin Hood” district, financing technology through Debt Service allows for each tax dollar to benefit the students and taxpayers of the district.