FORNEY, Texas — The Forney Independent School District (ISD) is among one of the fastest growing school districts in the state of Texas and, with Kaufman County projected to be the eighth fastest growing county in the state by percentage through the year 2050, the growth isn’t anticipated to slow.
FORNEY, Texas — The Forney Independent School District (ISD) is among one of the fastest growing school districts in the state of Texas and, with Kaufman County projected to be the eighth fastest growing county in the state by percentage through the year 2050, the growth isn’t anticipated to slow.
In 1999, according to a Friday afternoon Forney ISD press release, the district consisted of four campuses: an elementary school, an intermediate school, a middle school, and a high school. The enrollment at the time was just over 2,000.
By 2008, enrollment tripled to more than 6,000 students forcing the district to add six elementary campuses for a total of seven elementary campuses in addition to a middle school and a high school.
Today, the district operates out of 14 campuses, a majority of which were funded by voter-approved bonds in recent years: two high schools, two middle schools, and nine elementary schools, and the Forney Academic Center. Current enrollment is projected to be just over 9,000 students.
In a release Friday afternoon, the district stated no new debt would be issued through 2027, effectively halting any new campus development, due to a state law which caps interest and sinking (I&S) tax rates — which is used to pay bond debt — to 50-cents per $100 home valuation, a rate Forney ISD is already capping.
“For fast growth districts like Forney ISD, this can be particularly challenging,” the district stated in their release. “Often, the need to build schools to keep up with student growth exceeds the taxing capacity at a $0.50 tax rate.”
“Prior to 2010, the property values in Forney ISD were increasing at a rapid pace. At the time the bonds were issued, the repayment structure reflected the rapidly increasing trend in property value growth.”
“After 2010, however, the recession caused property values to remain relatively flat for four years. This made it impossible for Forney ISD to service its existing debt with a $0.50 tax rate,” continued the release. “At this point, the District began refinancing debt and changing the repayment structure to ensure a $0.50 tax rate would raise enough money to repay its debt over the next few years.”
Fast-growing districts across the state have been or begun issuing capital appreciation bonds (CAB), also known as premium compound interest bonds, instead of the more traditional current interest bonds — which effectively push back payment dates to meet current bond debt obligations. CABs come at a cost though, higher interest rates and larger debt payments in the future.
The district issued four such bonds between 2013 and 2014 to refund portions of bonds dating back to 2000 with interest rates between 6.13 and 8-percent. The restructuring of the district’s debt under these CABs, approximately $20,424,986, did not result in any present value savings.
With the district’s I&S rate capped and approximately $729,341,490 in debt service obligations through 2054 (as of June 30, 2014), the district’s long-term plan — established by the Board of Trustees, administration, and the district’s financial adviser — does not include any new debt until 2027 which means no new school campuses to accommodate any growth beyond the district’s current maximum enrollment capacity.
Forney ISD could house up to 15,000 students district-wide but that number is subject to campus-to-campus growth depending on the age of the students where the future growth comes, according to Forney ISD Chief Financial Officer John Chase speaking to inForney.com.
The district’s first option would be to re-align campus boundaries, stated Forney ISD Communications Director Larry Coker. The district could also weigh moving special programs such as the dual-language program as well as the addition of temporary classrooms, more commonly known as portable classrooms, which would be funded through the district’s general operating fund and wouldn’t impact the district’s debt service.
Class-size waivers are also an option.
A demography firm is currently working to provide the district with enrollment projections per campus and will propose attendance boundary changes to accommodate growth at existing campuses.
Chase says, based on preliminary data, it would be three or more years before portable classrooms become a necessary option.
According to the district’s annual financial report for the year ending June 30, 2014, nearly $300 million of the district’s $729 million in bond debt through 2054 is in CABs.
The district’s long-term plan also included a restructuring of currently callable bonds which resulted in an estimated savings of $9 million due to favorable interest rates, according to the release. The plan also calls for future refinancing in 2016, 2018, 2020 and 2021.
“We do have a small number of districts where CABs have become a large portion of their debt portfolio, and that’s pretty much because of the 50-cent debt test,” Fast Growth School Coalition Executive Director Michelle Smith told the Texas Tribune in an August 2014 report on Texas ISDs usage of CABs.
“In addition to trying to stay ahead of student enrollment growth, many fast growth districts are ‘rooftop,’ or residential, districts that are unable to generate as much property tax revenue as districts that have significant commercial growth,” Smith stated in an editorial published on TribTalk.com. “The main reasons, however, are the state’s decreased financial support for facilities and its prohibition against local communities building more schools if they have reached a certain tax rate — even if a school district is still taking in a significant number of students.”
Neighboring Crandall ISD also falls within the fast-growth district category and is near the 50-cent cap. In 2013, according to a district audit, the district was staring down approximately $95 million in debt through 2033 with an enrollment of approximately 3,166, according to the Texas Education Agency (TEA). In 2013 alone, Wylie ISD issued $79.4 million in CAB debt — the most by any district in Texas in 2013 according to the Texas Tribune citing state records.
Rockwall ISD, which has a significantly higher retail and commercial tax base than Forney, is nearing $700 million in total debt through 2042 with an I&S rate of 40-cents, according to a 2014 audit, with an enrollment of approximately 14,200 students.
Higher projected property values or a change in the 50-cent cap could offer an early reprieve to the district’s 2027 new-debt freeze. In regards to CABs, Chase said once the bonds become callable they could be repaid sooner.
The state legislature has also been presented with several options which could allow fast-growing districts an increase in the 50-cent cap. If approved and needed, the district would then be able to take advantage of approximately $30 million in bond debt already approved by Forney voters which has yet to be issued.
Forney ISDs release concluded, “Even with the financial restraints associated with the current school funding formulas, Forney ISD has made tremendous strides in becoming fiscally sound. Over the last four years, FISD has been able to increase teacher salaries, add back positions, receive clean audits, improve bond ratings and put money in fund balance to cover emergencies. The Forney ISD Board of Trustees’ and District Administrators’ work on the District’s Long Range Plan will continue to focus on being fiscally responsible and transparent while helping Forney ISD continue to grow and develop into a strong and efficient District providing the best education possible for all students.”
“The Board and administration’s goal is to be fiscally responsible in the management of debt, to develop a sound operational budget and to plan for future growth in the District,” stated the release.
