Each week, “Answer Key” aims to help families by responding to an important question about education and schools in Greater Houston. If you have a question for us to answer, please email us at education@houstonlanding.org or fill out the form at the end of this article.
This week’s question:
Some people say HISD’s bond is $4.4 billion. Others say it’s $8.9 billion. Which is it?
If you’ve kept a close eye on the discussion around Houston ISD’s historic bond package, you might have seen two massively different numbers thrown around to describe the size of the proposal: $4.4 billion and $8.9 billion.
Both numbers are accurate, but they speak to the different ways to view the size and cost of the bond.
So what’s the difference? And what do the two numbers actually mean? Here’s what we know.
Why do some people say the bond is $4.4 billion and others say it’s $8.9 billion?
For school districts, bonds are very similar to a loan with interest.
When they sell bonds, districts get money upfront from bond buyers. In return, the district pays back the upfront money, commonly known as “principal,” and also pays interest to the bond buyers. Interest is the cost to the district of getting lots of money upfront.
For HISD’s bond proposal, $4.4 billion is the amount of money HISD would get upfront from selling the bonds. That money would be spent on upgrades to district campuses — such as renovating schools, building new educational facilities and updating security systems — and buying new technology.
The $8.9 billion number is the cost of paying off the principal and interest of the bonds. In this case, the principal is $4.4 billion and the interest is $4.5 billion.
How does a school district pay off bonds?
To pay billions of dollars to bondholders, school districts use property taxes collected from property owners within their boundaries. For example, HISD took in about $350 million in property taxes to pay off principal and interest on older bonds in 2022-23, the most recent year with available data.
HISD charges 16.67 cents per $100 in taxable value each year to pay off school bonds. That’s $640 for a homeowner with a property valued at $400,000, roughly the district average, though many homeowners pay less due to homestead exemptions and other tax breaks.
HISD doesn’t plan to raise its tax rate if the bond election is successful.
How can HISD pay off $8.9 billion without raising taxes?
The billions of dollars in bond-related costs will be paid over the next three decades. HISD leaders believe the district will generate enough property tax revenue at the current tax rate to cover the cost of current and future bond payments if the November election is successful.
How have other districts talked about bonds and their costs?
Historically, the conversation around school bonds focuses on the amount of money that will be spent by the district — not the total cost including interest.
But that’s more a reflection of how people have talked about bonds, rather than the financial reality of school bonds. For example, the discussion around Conroe ISD’s bond in 2023 centered on the $2 billion in potential upgrades for the district, with minimal mention of the $1.5 billion in interest associated with the bond.
This year, opponents of the HISD bond have focused more than usual on the total cost to taxpayers when making the argument against the package.
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