This brings us to the area where we felt NCTC's estimate was low on the bond tax rate and started
looking deeper since it had gone down 17% and the actual bond only went down 5.5%. How
can that work?
Our math indicates that NCTC's estimated tax rate
of 7.2 cents falls short of the funds needed to make the 25 year bond payment in their example by $258,608 each year.
Our calculations show the tax rate needed to make the bond payment using their assumption of a $30,704,000 bond @ 4.95% interest
would be 8.197 cents. That is about a penny higher, more than 13.8% higher than NCTC's
and Vote For NCTC's published estimate. It may require more if the payment includes insurance on the bond.
For the $100,000 home illustration that NCTC likes to use, this will raise the cost of the bond by about $250 over the life
of the bond, assuming a constant tax rate as NCTC does. More detail is provided below.
We
have noticed that is "Vote For NCTC" is putting out ads saying the tax rate will not be higher than 7.2 cents
for the bond payment. Do they now speak for NCTC and the NCTC Board? How can they make that commitment when there
appears to be no such limit in the bond resolution. The ballot wording according to NCTC's web site says:
"THE
ISSUANCE OF BONDS IN THE AMOUNT OF $30,704,000 FOR THE CONSTRUCTION, RENOVATION, ACQUISITION AND EQUIPMENT OF SCHOOL BUILDINGS
ON THE DISTRICT'S GAINESVILLE CAMPUS AND THE LEVYING OF THE TAX IN PAYMENT THEREOF." Where
is the limit??
The wording in the Bond Resolution places no limits on the bond interest rate or tax rate other than the maximum rate permitted by law:
"SHALL the Board of
Trustees of the North Central Texas Community College District, Cooke County, Texas be authorized to issue bonds of the District
in the principal amount of $30,704,000 for the construction, renovation, acquisition and equipment of school buildings on
the District's Gainesville campus; and shall there be pledged and levied, assessed and collected annually ad valorem taxes
on all taxable property of the District in Cooke County, Texas, sufficient, within the limitations prescribed by V.T.C.A.,
Education Code, Section 130.122, to pay the principal of and interest on said bonds; said bonds to mature serially or otherwise
not more than forty (40) years from their date, to be issued in one or more series at any price or prices, and to bear interest at such rate or rates (fixed, floating, variable or otherwise and not
to exceed the maximum rate permitted by law at the time of issuance of the bonds) as in its discretion the Board of Trustees
shall determine?"
NCTC has not changed their estimate of the tax rate as we have suggested.
We have reviewed this with NCTC as much as they are willing to do so and believe we are in agreement on the interest rate
assumption of 4.95% for a 25 year bond and the annual payment, within a rounding factor. Our annual payment estimate
is just slightly lower at $2,167,619.80, not enough to make any significant difference.
Where we
disagree is the tax base NCTC can apply this to. NCTC & Southwest Securities changed their estimate of the tax base,
to assess the payment to, from $2.625 Billion in January 2011 to $3 billion in August 2011. While the NCTC tax base,
(Net Taxable on Cooke CAD report), is just over $3 billion, the Freeze Adjusted Taxable = 2,594,930,083, (red arrow to the
right of the yellow highlighting). It is our understanding that NCTC can only collect an additional $40,661.72 from
the tax base shown as frozen, $428,697,313, (highlighted in yellow, since that will put them at the ceiling). Assuming
that is correct, subtracting $40,661.72 from the bond payment of $2,167,619.80 leaves a remainder of $2,126,958.08 to
be collected from the unfrozen tax base: Freeze Adjusted Taxable = 2,594,930,083 on the Cooke CAD report. Our math shows
the tax rate to meet the payment that NCTC projected for a 4.95% interest bond for 25 years is 8.197 cents, almost a penny
higher than NCTC is projecting @ 7.2 cents. We arrive at that by dividing the remainder of the bond payment of $2,126,958.08
into the Freeze Adjusted Taxable = 2,594,930,083/100 to get the tax rate per $100 of valuation.
I'm
sorry this is so long and involved. The topic is somewhat complex. We value our integrity and where we disagree with
NCTC, we want to make sure it is clear where we agree and where we disagree. However; if our calculations and analysis
are correct, the tax affect is 13% higher than NCTC's estimate or about an additional $10 per year, or $250 over the life
of a 25 year bond for a $100,000 home. If you have a $200,000 home, you can double that.
We
have attached the analysis NCTC provided us from Southwest Securities from January and August 2011 at the link below
for reference.
