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Tax swap will keep tax rate from rising but increase revenue

McAllen ISD recently approved a tax swap which will benefit the community in two ways: revenue will increase while the tax rate remains the same.

This was made possible by shifting pennies in two accounts. The district decreased the tax rate in Interest and Sinking (I&S) by 11.5 cents. At the same time, it increased the tax rate in Maintenance and Operations (M&O) by the same 11.5 cents, keeping the overall tax rate the same.

However, the shift will provide the district an estimated $7 million in additional state funding without increasing the total tax rate. The state gives school districts more funding for M&O than for I&S.

A severe weather event that occurred in May, 2016, opened the door for this one-time opportunity known as a Disaster Tax-Rate Option. This option allows McAllen ISD to make a one-year change to leverage its M&O and I&S tax rates and maximize state funding. The additional $7 million generated is for one year only.

The total tax rate is the lowest school tax in Hidalgo County at $1.155 per $100 of property valuation. The McAllen ISD Board of Trustees has not raised this tax rate for nine straight years thus, continuing a tradition of achieving the most effective and efficient use of taxpayer dollars.

School districts are funded through different sources, including local tax dollars, state funding and federal funding. Local tax dollars are collected and go into two different funds: Maintenance and Operations (M&O) and Interest and Sinking (I&S). The M&O pays for everyday operations, including salaries, books and building maintenance. The I&S works similarly to a mortgage. It can only be used to pay the debt on school bonds.

The Board of Trustees approved the shift on September 4.

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