In the early February 2012 issue of McKinney Living Magazine, our team published an article stating that sales in Collin County were up and inventory was down, indicating the beginning of a seller’s market. True to what we felt in our business as early as October 2011, the market rapidly turned into one of the best markets we have seen in many years. Average McKinney sales prices have indeed been on the rise and according to the Collin County Appraisal District Certified Value Summaries for McKinney ISD, values for the average 2013 taxable McKinney ISD home have increased over 4% from the 2012 tax year.
By now, McKinney ISD residents should have received the McKinney ISD TRE 2013 tax ratification brochure in the mail. According to the information published, MISD, will be forced to reduce their budget by $10.7M in 2014/15 school year, as claims made by the ISD that State Funding was cut by $11.2M in 2011/12 and $4.5M in 2012/13 school years. As we began this school season, school orientations were used as a venue to communicate to hundreds of parents and incoming students about the importance of passing the TRE, as without it, hundreds of jobs would be cut as well as a variety of programs. Some teachers, against MISD policy, have been telling students to have their parents vote in favor of the TRE and students who are 18, were encouraged to vote and also given the seemingly grim message.
As a McKinney resident and Realtor, I was very surprised to hear about a TRE. After reading all of the on-line articles and propaganda on why MISD is proposing this property tax increase, it became very evident that not all of the facts were presented to McKinney residents, rather only half-truths and scare tactics were offered by MISD to support their position. As a business professional, I understand that a good educational system is paramount to attracting buyers with school age children to McKinney. I also know that all buyers will consider city property tax rates before making a purchasing decision, not just those with children. It’s a delicate balance of tax rates, educational systems, and available homes that meets a buyers needs, whether pre-existing or new construction. Finally, all buyers will compare how McKinney stacks-up on these factors with other neighboring communities.
In order to understand if MISD has sufficient reason to raise our tax rate, it involved peeling back the onion to uncover the facts. This required analyzing all of MISD’s audited financial statements, adopted budgets, Collin County Appraisal District Certified Reports and Texas Education Agency School Finance Reports. It also required looking at other ISD tax rates in Collin County and of course knowing and understanding the current and projected realestate trends here in McKinney, including the fact that our city leaders have recently brought in more business to McKinney. After spending countless hours of research, I have concluded that at this point, there is no reason to raise our taxes to the level that the ISD is proposing, simply for the fact that current market conditions alone should increase the amount of taxable revenue that MISD will need to keep funding their budget. I thought I would share with residents my findings and let you decide how to vote based on all facts.
Analysis of MISD financial statements for years 2010, 2011, and 2012, indicates that:
• State Aid for MISD was $65.2M, $73.7M and $69.8M respectively, indicating an increase of $8.5M from 2010 to 2011 and a decrease of $3.9M in 2011 to 2012.
• Over the three year period, there was a net increase of State Aid of $4.6M.
• Actual MISD revenues have exceeded MISD budgeted amounts by an average of 8% in the past two years.
• Increase of net assets (Revenues minus Expenses) of $10.7M in 2012 thus adding to the overall MISD balance sheet for 2013.
• MISD proposed budget for 2013/14 the General Fund has a beginning balance of $53.7M, $18.4M for the Debt Service Fund, and $2M for the Food Service Fund.
For more details regarding the MISD Audited Financial Statements and Budgets, check out the following websites:
What residents may not know, for this 2013 tax year, McKinney ISD will potentially receive about $12M in additional tax revenue over last tax year merely by the fact that market factors have increased sales prices which increases the amount of revenue the ISD will receive. According to the Collin County Appraisal District (CCAD) here are some facts to consider:
• McKinney ISD revenue is estimated to be $149M for 2013.
• The average 2013 McKinney ISD home is valued at $222,000. For the 2012 tax year, this home was valued at $213,000.
• At our current tax rate of 1.54, the home owner is paying a tax increase of about $220.
• If the TRE passes and the rate increases to 1.67, an additional $269 will be added to the tax bill, raising the total tax increase to $489 from the previous year.
• Safe to assume another property value increase in 2014. At 5%, the average MISD home value would be $233,000 which adds an additional $286 in property tax.
• CCAD by law can increase assessed value a maximum of 10% each year.
To view the CCAD Certified Summaries see the following website:
It’s important for homeowners to understand in this sellers market, home sales prices have significantly increased, 12.2% over this time last year according to our local MLS. The Collin County Appraisal District has a complex method of establishing home values which includes analyzing our MLS data by neighborhood, which they have access to, however, they will also look 3 months the previous calendar year beginning in September and 3 months following the calendar year in March to help determine home values for a given tax year. Since tax year figures are one year in arrears, McKinney homeowners can probably expect another increase in 2014 as home sales continue to increase throughout the 2013 calendar year.
If you want to know the effects this has on your own tax bill, take your 2013 Notice of Appraised Value tax bill and use the 2013 “taxable” value for McKinney ISD. Divide this number by 100 and multiply this by $0.13. This is the new proposed tax increase for your home. If the TRE passes, you can expect to pay this increase at the end of this calendar year.
Since a large portion of funding the ISD’s comes from our property taxes, currently 62.8%, the ISD is asking that this percentage be increased to 64.7%. Here are some facts on tax rates:
• If the TRE passes it will increase our total taxable rate from 2.4518 to 2.5818.
• McKinney will have the highest property tax rate compared to near-by “sister” cities, assuming that our County Assessor keeps all other tax percentages constant later this fall.
• Other cities passed TRE’s but not at the same rates. Only Allen and Prosper are at the same rate as proposed by MISD.
• Plano is voting for an increase M&O rate of $1.17, however, they plan on lowering their debt service rate by $.05, making their ISD tax rate 1.455 with a total tax rate of 2.2699.
The TEA equalizes the wealth of a District using wealth per student in Weighted Average Daily Attendance (WADA). If Districts are above the equalized wealth level of $319,500, they may be subject to wealth equalization a.k.a. “Robin Hood”. In order to understand if a tax increase might be subject to recapture and how the State handles ISD aid and funding, here is what Texas Education Agency (TEA) Program Administrator of School Finance had to say:
• MISD has a “target revenue” number that MISD, not the State, set back in 2007 as a result of lowering the tax rate. When we hit the “target revenue”, more money flows to the District. MISD is almost at target.
• At our current M&O tax rate of $1.04, we need an additional $884,628 in revenue to hit our target.
• If the actual 2013 revenues, which will be out next year, hit our target, the overage will flow directly to MISD, however, if the revenues increase substantially, then potentially, a portion of the revenue could be “recaptured” by the State and distributed to poorer ISD’s.
• The State recently allowed more aid to flow to the ISD’s. Many of the other Districts have reached their target which is partly why they are receiving more funding.
• Up to this point, MISD has never had any recapture. The list of Collin County ISD’s that have had recapture include Allen, Lovejoy, Frisco, Plano, Prosper, and Wylie.
• In 2012, the State has recaptured over $40M in property tax revenues from Collin County ISD’s.
• If the tax increase passes, then the probability of recapture would be that much faster than if the ISD held to the current rate as it will generate more taxable revenue this year.
• The State gives up to 6 pennies over $1.00 to the Districts for monies to flow directly to the ISD’s. MISD is only using 4 pennies; hence we are not seeing all the money flowing to us that the State allows.
I asked the TEA Administrator, if a $.02 increase would maximize revenue from the State, why wouldn’t the District ask for just that? He indicated that it would be a good compromise but Districts preferred to get the maximum all at once and not have to go through another TRE. With a stellar 2013, does it make sense for voters to artificially raise taxes this year only to have a portion of them recaptured and distributed to poorer ISD’s that much sooner?
Here is the link for the TEA’s McKinney School Finance Report: https://wfspcprdap1b16.tea.state.tx.us/Fsp/Reports/
Story submitted by Sandy Jendal