DeSoto ISD Interest and Sinking Fund Dilemma
→ Some cautionary information for CHISD voters
After passing their "Penny Drop" style Tax Swap TRE in 2015, DeSoto ISD has rapidly developed an I&S Fund balance problem. They are burning the fund away via deficit spending.
At their July 9, 2018 meeting the DeSoto ISD Board of Tristees discussed two scenarios for managing their problem. The following table summarizes the past fund balance trends and the two options they discussed for dealing with the problem:
| DeSoto ISD I&S Fund TRE Related History1 | |||||
|---|---|---|---|---|---|
| Fiscal Year | Tax Rate | Fund Balance | Pre-TRE | ||
| 2013-2014 | $0.45 | $12,250,652 | |||
| 2014-2015 | $0.43 | $12,317,665 | |||
| 2015-2016 | $0.29 | $10,487,927 | Post-TRE | ||
| 2016-2017 | $0.29 | $7,390,945 | |||
| 2017-2018 | $0.32 | $3,923,001 | |||
| DeSoto ISD I&S Fund Options2 | |||||
| Fiscal Year | Option 1 | Option 2 | |||
| Tax Rate | Fund Balance | Tax Rate | Fund Balance | ||
| 2018-2019 | $0.32 | $1,933,423 | $0.320 | $1,933,423 | |
| 2019-2020 | $0.32 | -$(758,358) | $0.345 | $81,024 | |
| 2020-2021 | $0.32 | -$(3,651,362) | $0.400 | $8,334 | |
| 2021-2022 | $0.32 | -$(6,718,493) | $0.403 | $23,171 | |
In the world of fiscal sanity, DeSoto ISD only has one option and that is Option 2.
Some implications associated with having to pay their debt:
- Two years after convincing their citizens to pass the "Penny Drop" style TRE, DeSoto ISD raised their I&S Tax Rate by 3 cents such that their total rate was 2 cents higher than before the TRE
- Option 2 projects in Fiscal Year 2020, the total Tax Rate for DeSoto ISD will be $1.57 ($1.17 + $0.40) or 3 cents above their pre-TRE maximum allowable total tax rate and 10 cents above their pre-TRE total tax rate
- The 2021-2022 projected rate of $0.403 it takes to pay their Debt Service is only $0.027 less than the $0.43 I&S tax rate DeSoto ISD had the year prior to the TRE and puts their total tax rate 10.3 cents higher than it was pre-TRE
- DeSoto ISD could not afford the reduction in I&S it took to "promise" the penny reduction in overall tax rate
1 Historical information from DeSoto ISD Financial Transparency Data
2 Projections from DeSoto ISD briefing package for the July 9, 2018 Board of Trustees meeting
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Last changed: September 06, 2018, at 10:13 PM