Sealy ISD cuts optional homestead exemption to 10%

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Very reluctantly and knowing the potential consequences, members of the Sealy ISD Board of Trustees voted to cut the optional local homestead tax exemption from 20% to 10% in order to prevent having to make drastic budget cuts later due to the COVID-19 pandemic and the impact of House Bill 3 from the last legislative session.

The action was taken during the monthly board meeting last Wednesday at the Sealy Junior High cafeteria. The board held a public hearing prior to the meeting where Chief Financial Officer Lisa Svoboda outlined the importance of acting now versus later when finances are in a crisis. The item was brought up during the regular meeting where the board voted 6-1 to make the tax reduction, which will go into effect next year. The reduction to 10% will mean taxpayers pay $127 more per $100,000 of property value.

“Every decision we make is what’s best for the kids,” said Ryan Reichardt, board president. “What’s the best things for kids? If I’m going to hold all of my administrators accountable for doing their jobs, what’s the best thing for kids, what’s the right decision for me to make as a board member?”

The optional homestead exemption was an option school districts could provide going back to 2004 to give taxpayers a break. The maximum allowed was 20% and Sealy was one of only a small handful of districts in the state to still offer the full discount. Over the years most districts did away with the exemption or else significantly lowered the percentage.

In her presentation, Svoboda noted that Bellville, Columbus, Katy, and Waller ISDs do not offer the tax break, and Brazos only offers 5% and Royal just 1%.

“I want to be clear that this has nothing to do with your mandatory exemption of $25,000. This is not the same thing,” she said.

Svoboda said most districts cut or eliminated the discount when HB3 kicked in, forcing districts to lower their tax rates.

“The district cannot sustain its financial health when being forced to lower tax rates by law and continuing this optional discount at 20%,” she said.

Svoboda said reducing the tax break now will have an impact on the budget two years from now. Without reducing the rate to 10%, she said the district would have to cut teachers and staff, offer no salary or benefit increases, cut programs and electives for students, and run a deficit budget.

Despite those warnings, one member of the public and one board member felt it was wrong to take action that would raise taxes during the pandemic.

“Timing is everything. We’re living in a time now where people are forced to live below the means they may have had last year. Now we’re faced with the fact that we may be going into another lockdown and the means that we have today may even go lower,” Reid Cashdollar, the only member of the public to speak at the hearing, said.

“I’m very concerned about the timing of it, I’ve been stressing that,” said Trustee Kristen Novicke, who voted against lowering the exemption. “It’s not been a good year for a lot of people. It’s inevitable that we’re going to do this, I just think that it’s probably not the right time. We need to really look at households are cutting their budgets, businesses are and schools. I don’t feel comfortable approving this until we get down to the nuts and bolts of our budget.”

Trustee Joe Mike Young said his four children benefited from all the programs the district has to offer and he can’t justify taking those opportunities away from other children when they have the option to do something about it.

“It might not be the decision I want as a taxpayer, but I have to look at what my kids were given the opportunity for and what other people’s kids are going to have the opportunity for,” he said.

He said the taxpayers in the district might be paying higher taxes but they’re still getting a break.

“We have to think about the future. We’ve been giving a gift for a lot of years here,” he said. “You’re still going to be given a 10% gift. You’re still going to get a 10% gift over most of the districts in the state of Texas. When I leave here tonight I’m probably going to get my ass chewed out, I guarantee it.”

Trustee Creed Roberts said the board “can’t kick this can down the road.”

“If we move this down another year we’re going to be in worse shape than we are right now,” he said. “We’re going to have to make that hard decision. We’re going to have to watch our expenditures … We’ve got to help … the school district, the possibility of keeping the teachers that we have. As we speak right now, there’s no way we’re gonna if we do absolutely nothing. Your property tax won’t change this year it’ll probably change next year.”

Trustee Jay Aguado said the board would be going against its stated goals if it failed to act.

“One of the main things as our board goals is that we want to make sure our students are career ready, college ready, and military ready. We can’t offer that with things the way they are now,” he said. “We can do the 10% today and it gives us the opportunity to keep our teachers – we don’t have to do layoffs – give these kids the opportunity to have these programs, it allows us to basically not be in a deficit …. The thing is we have to make sure we stick to our goals. We’re going to offer the kids everything, we’re not going to leave anyone hanging.”

In other action:

  • Trustees Katy Grigar and Jay Aguado were certified as election winners and sworn in for their new terms.
  • Svoboda presented the 2020 audit report. She said it was a clean audit and noted that the fund balance grew by $200,000 to $7 million, largely due to savings from last spring when the district shut down and went to online learning during the start of the pandemic. That saved the district money in substitute teacher salaries and building maintenance, among other things.
  • The board approved the Multihazard Emergency Operations Plan.
  • District Project manager Mike Zapalac informed the board that the new ag barn and culinary kitchen were complete except for a few warranty items that needed fixing. He also noted that COVID-19 expenses were taking a toll on the budget ($20,000 so far). “We’ve gone through about a million paper towels,” he said.
  • The district will pave the gravel overflow parking lot at the football stadium. Hailiang Copper Texas has offered to do it, but the district will still have to incur some expenses related to it. To cut expenses, the board opted to go with asphalt rather than concrete pavement.

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