HISD Bond Proposal Deserves Our Support
As many of you are aware, HISD has proposed a $1.89 billion bond issue. Those of you that are regular readers of this blog or my columns in the Houston Chronicle know that I am extremely skeptical of grandiose public projects. Many of you know that I have opposed projects like Metro’s light rail because I did not think its cost could be justified. I have also opposed other school bond proposals that included lavish stadium construction. But I do not believe in knee-jerk opposition to any proposal to invest our tax dollars. I have studied the HISD proposal in detail and I am convinced that it is a sound one and deserves our support.
The bonds will primarily be used to rebuild or substantial renovate 28 of the District’s high schools. The work is badly needed. The average age of the school slated for reconstruction or renovation is 52 years. They are dilapidated, leaking and were built without the infrastructure of labs and electrical systems to support today’s needs.
The average age of high schools in Harris County outside of HISD is 13 years. HISD simply cannot be competitive in retaining families in the City’s core if we continue to provide inadequate and antiquated facilities. Anyone who spends even a few minutes at any of these schools will see that the needs are real and the work long overdue.
The proposal includes rebuilding the DeBakey High School for the Health Professions inside the Texas Medical Center on a tract of land TMC has made available to the District. It also includes rebuilding the High School for the Visual and Performing Arts downtown in the theatre district. There will not be another city in the country that will have anything that even approaches these two schools.
Even those who are opposing the bonds do not question the need. Instead they have constructed several arguments which are based on inaccurate or incomplete information, to-wit:
: Some critics have suggested that HISD’s students are not performing academically and that money should be spent on improving instruction instead of buildings. But HISD academic performance has been steadily improving in recent years and is among the best for large urban school districts. The District’s drop-out rate is the lowest and its graduation rate is the highest in decades. HISD seniors last year earned $180 million in college scholarships, up from just a third that amount only three years ago.
This year HISD was one of four finalists the prestigious Broad award for most improved urban school district in America.
In addition, studies show that there is a demonstrable correlation between student achievement and the quality of the physical facilities. Much of this has to do with the availability of lab space and technical infrastructure. However, there is also a psychological effect from working in clean, modern surroundings instead of dilapidated ones. No business owners I know would ask their office workers to work in kind of space we are asking our kids to work in.
: Another criticism that has been frequently leveled at the bond campaign is that HISD’s enrollment is declining, implying that the District is building facilities it does not need. First, HISD’s enrollment is absolutely not declining
. For the last 20 years, it has ranged between 198,000 and 210,000 students. This year, HISD had the largest kindergarten class in its history.
This argument is further rebutted by the fact that the bond proposal is not building additional capacity but is instead replacing a worn out stock of schools and right sizing schools where enrollment has declined or increased. The size of each high school to be reconstructed or renovated is based on the enrollment in the District’s elementary and middle schools.
Taxes to Pay for the Bonds
: There has been a great deal of discussion about whether a tax increase will be required to pay for the news, and if so, how much it will be. First, any projection about future tax rates is, at best, an educated guess. The rate necessary to repay the bonds is primarily dependent on the growth of HISD’s tax base. HISD is required make an estimate of the tax rate that might be required to pay for the bonds. To do, it must make an assumption about future growth of the tax roll. HISD has made a projection based on some very conservative assumptions about how much the tax roll will increase. It assumed that the tax roll would grow by 3% for 2014-15, 2% for 2016-19 and 1% thereafter, for an average over the forecast period of about 1.5%. The average increase over the last 20 years has been about 5%.
Based on the 1.5% tax roll increase, the new bonds would eventually require a tax increase of 4.8¢ per $100 valuation. On a house worth $200,000 this would mean about a $70 per year increase. And because not all the bonds would be issued at once, even that increase would be phased in over about four years. Even after being fully phased in, HISD’s tax rate will still be, by far, the lowest of any school district in Harris County.
If the tax roll grows by its historical average of 5%, no tax increase will be necessary.
: Another argument advanced by the critics is that HISD should adopt a “pay-as-you-go” plan, arguing that such a plan would be cheaper for the taxpayers because it would save the interest that will be paid on the bonds.
First, if HISD were to adopt a “pay-as-you-go” strategy it would take 20-30 years to replace these high schools. That means that most of the schools would be 80-90 years old before they were replaced. This is simply not feasible. Many of these schools would be condemned long before they could be replaced on a “pay-as-you-go” plan.
But even if it were feasible it is almost certain that a “pay-as-you-go” plan would actually be more expensive
. Interest rates are currently at historic lows. HISD will probably be able to issue its bonds at about a 4% interest rate. Also, because of the building slump, construction prices are also favorable. Those prices will almost inevitably rise in the future. And if they rise faster than the effective interest to HISD, the building program would actually cost more on an absolute basis.
In the meantime we will have astronomic maintenance costs. HISD already spends tens of millions of dollars each just trying to keep these dinosaurs in service. Those will go up exponentially as the condition of these buildings continue to decline. And as you can imagine they are not exactly energy efficient. There is no rational business person that would adopt such a plan for their own business under these circumstances.
Use of 2007 Bond Proceeds
: There is also a criticism making the circuit that HISD either has not spent all of the 2007 (implying that it does not need any more bonds) and that the 2007 bond money was somehow misspent. Neither could be farther from the truth.
First, HISD has spent over 90% of the 2007 bond proceeds. There was some delay because of litigation that was filed over the 2007 bond election and some projects that were to be funded from the sale of excess real estate were deferred to market conditions. By the end of 2013 all of the projects in the 2007 bond campaign will be complete. Also, every project came in under budget
. This was due in large measure to the 2008 recession and catching a favorable construction cost cycle.
Amount of HISD Bond Debt
: The critics have also complained that HISD bond will have tripled since 2002 if the bonds are approved. What the critics leave out is that this increase in HISD’s bond debt will actually occur over a 15 year period. Adjusted for inflation during that time, HISD’s bond debt will actually have only about doubled. They also fail to mention that HISD has historically carried one of the lowest debt loads of any major district in the State. In 2011, HISD’s debt per student was slightly over $10,000 compared to a statewide average of nearly $14,000. So we are starting from a very low base, due in large part to the fact that we have let our physical plant deteriorate so badly.
: In the final analysis, however, this is not about a bunch of esoteric facts and figures. It is about the condition of the facilities where we are sending this City’s children to school. In that regard, I challenge any of you to go and visit one of these schools and see the deplorable conditions for yourself. Then ask yourself if you would send your child or your grandchild to that school. And if you would not send your child to that school, why would you send someone else’s child there?
We have left these schools go too long unattended. If we are not going to fix them now, then when?