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Tax Impact of NCTC Bond

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NCTC Senior Homestead Taxes are Capped, not Frozen. Many will go up if the Bond Passes.
 
NCTC is estimating the tax rate @ 3.95 cents to make the bond payment.    There is no such limit in the resolution adopted by the NCTC Board which says the "maximum rate permitted by law."  
 
See below for more details and discussion.  Who has done the Misleading in the past?

NCTC has been saying in their brochures and through other means since the Spring of 2011 that:

"Cooke County homeowners age 65 and older with an exemption would NOT have their homestead taxes increased by this tax bond."

It is our understanding that many senior citizens received phone calls from NCTC employees and bond supporters asking them to vote for the bond and telling them it wouldn't cost them anything because their homestead taxes were frozen.

We found out on Monday Oct 24th based on a report we got from Cooke County Appraisal District that the above statement was untrue.  We pointed this out to Dr. Hadlock @ NCTC later Monday.  While he has not responded to our e-mails, the above statement was removed from the Bond Package Brochure on NCTC's web site late on October 25th.  It was replaced with: 

Cooke County homeowners with a 65-and-older or disability exemption would NOT have their homestead taxes increased by this tax bond above the “ceiling" established when their exemption was granted. Because college taxes have decreased in recent years, some exempted taxpayers are currently paying college taxes below this ceiling. Therefore, if the bond passes, it is possible that some exempted taxpayers may see a slight rise—but not above the original ceiling amount. You can see the actual brochure on NCTC’s web site at the following URL.  http://www.nctc.edu/documents/BondIssuePackageBrochureRevised10-25-November.pdf

Will the NCTC employees and bond supporters who called Cooke County Seniors and gave them the wrong information now call them and make sure they understand that the bond could increase their taxes??  If they already voted, can they change their vote?  Our guess is no to both.   If you are a senior and have had a call from NCTC advising you that your taxes could go up, we'd appreciate hearing about it since NCTC has gone silent on this.

Our best understanding of this topic is the NCTC Board authorized the Senior Tax Ceiling in the Spring of 2004.  It appears starting in 2005, the appraisal district established the ceiling for Seniors 65 and older and for those who qualified based on disability.  The link below shows two pages from the 22 page report we received for the tax years 2001 & 2005.  We put the 2011 page first as it is most germane to the current discussion.  

The 2011 Levy Totals for NCTC show a Net Taxable = 3,023,627,396 and a Freeze Adjusted Taxable = 2,594,930,083.  You should see red arrows next to these numbers on the report.  To the left of that, you will see columns for the Actual Tax & Ceiling with total actual values of $296,295.62 for the Actual Tax and $336,957.34 for the Ceiling.  The difference of $40, 661.72 is how much Senior and Disabled Taxes could go up collectively if the NCTC bond passes. If for illustration purposes you assumed half are paying at the cap and half are not, the average annual increase those paying below the cap/ceiling could see is about $22.  We haven't seen any reports showing exactly how many seniors are affected.  If we had it, we would share it.  Over the life of a 25 year bond, that $22 a year would add up to about $550. 

If you as a senior or disabled check your tax statement and determine what your NCTC taxes were as of 2004 or when you filed for the over 65 exemption, whichever came later, that is most likely your NCTC tax ceiling as we understand it, if you have made no taxable improvements.  If for 2011 you are paying less, your taxes would probably go up to your ceiling/cap if the bond passes.  If you are currently paying at your ceiling, you should see no tax increase.  Please keep in mind this is only for property that qualifies for the "65 and over" homestead exemption.

Cooke CAD report on 2011 & 2005 Total Tax Levy for NCTC

The following link may provide a better explanation although it is not specific to NCTC.  We found it helpful.  

Texas Property Taxes - Saving on Home taxes by John H. Carney & Associates

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.

NCTC Bond Summary Comparison 2011 from Southwest Securities

See the actual NCTC Bond Resolution with the words: "maximum rate permitted by law" in Section 1 on page 1.

Don't take our word for it. See the wording of the NCTC bond resolution yourself. Click this link.


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