The buzz on bond issues
By: Sarah Wilson
Recently a reader wrote wondering if voters really understood what municipal bonds are and how they work.
Good question – especially with two bond issues on the upcoming April 3 ballot.
Municipal bonds are issued by cities, agencies, special-purpose districts, school districts or airports to provide funds for major public maintenance projects and capital improvements. At the time of issuance, the bond issuer receives a cash payment in exchange for a promise to repay the bond holders (investors) over time. Repayment periods can be as short as a few months or as long as several decades. Bond issuers fund the repayment through a debt service levy (taxes), which is why voters must approve bond issues. Ultimately, it is the current and future residents of the municipality who repay the bonds.
The Missouri Constitution requires a four-sevenths, or 57.14 percent, majority to pass a bond issue.
A no-tax increase bond issue indicates that the bond issuer expects the existing debt service levy to be adequate to meet the repayment requirements of the bond issue, thus resulting in no tax increase.
The bond issues to be voted on during the April 3 election are:
Metro West Fire Protection District’s Proposition L
Prop L would cost $19,400,000 to acquire and improve fire protection, emergency services and firefighting apparatus and other equipment, including the acquisition of new ambulances and pumper trucks and scheduled replacement of other vehicles and equipment. The proposition also would include constructing, reconstructing, improving and furnishing facilities for Metro West, including renovating all stations, constructing and furnishing additional facilities, computer and technology and general improvements at all district facilities. If the proposition is approved, the adjusted debt service levy of Metro West is estimated to remain unchanged at 15 cents per $100 assessed value of real and personal property.
Rockwood School District’s Proposition R
School systems receive two basic types of funding: the annual operating budget and bond issue funds. The Rockwood School District’s Prop R is a no-tax increase bond issue, which means each year, the district will pay off the debt from previous bond issues. Therefore, assessed value grows. Prop R would cost $43,200,000 to acquire, construct, renovate, repair, improve, furnish and equip school sites, buildings and related facilities in the district, including technology infrastructure and classroom technology, safety and health measures and maintenance of current facilities by continuing to fund major capital repairs and improvements. If the proposition is approved, the adjusted debt service levy of the school district is estimated to remain unchanged at 68 cents per $100 assessed value of real and personal property.