Share to:

An Introduction to School Bonds

What is a school bond?

School districts issue bonds to raise funds for various capital expenditures, such as building new schools, renovating existing facilities, or purchasing land for future construction. These projects are typically too expensive for the school district to pay for with its operating budget, so it turns to the bond market to raise the necessary funds. Bondholders are loaned money and receive periodic interest payments, while the district is able to finance its capital needs over a longer period of time. This allows the district to spread the cost of its projects over several years, rather than having to pay for everything all at once, like someone would traditionally do for a mortgage.

How long does it typically take to pay off a school bond, and why might my school district choose not to pay it off early?

Bond terms can range from as short as a few years to as long as 30 years or more, but they commonly fall between the 20 to 25 years range. The district will make periodic payments of principal and interest to bondholders until the bond is fully paid off. While some voters believe all debt is bad, and would prefer a school district to pay off their bond debt as quickly as possible, there are many reasons why that is not a financially sound approach, such as:

  • Early repayment penalties: Many bonds come with a provision that imposes a penalty on the borrower for early repayment. This is done to compensate the bondholders for the loss of interest payments they would have received if the bond had run its full term.
  • Lack of funds: Paying off a bond early requires the district to have a large amount of funds available. If the district does not have sufficient funds, it may not be able to pay off the bond early.
  • Financial planning: The district may have planned its finances around a specific debt repayment schedule, and paying off a bond early could disrupt its long-term financial planning.
  • Debt management: The district may prefer to maintain its existing debt structure, rather than paying off one bond early and potentially having to issue new debt in the future to finance other capital expenditures.

How often does a growing school district issue a new bond, and when can I expect these new schools to be built?

It is common for a school district to issue a new bond every 2 – 5 years, and it takes 6 – 18 months to design a new school and another 12 – 24 months to construct it. This means that taxpayers of growing communities should expect to see a new school bond on their ballot, while the schools from the previous ballot are still being built. If not, there is a good chance their school district is behind, and will run into overcrowding or maintenance related issues before they have the funding to address them.

School bonds provide a vital source of financing for school districts to fund capital expenditures. As voters and taxpayers you should understand the reason we are voting and the implications of a For or Against vote, and how it will impact our checkbook, our community, and our children.

At Front Line Advisory Group, we provide program management consulting services for capital improvement bonds. We are revolutionizing the construction industry and transforming client expectations by obsessing over the basics of budget oversight, schedule enforcement, compliance, vendor management, and stakeholder communication. Contact us for more info at info@frontlineadvisorygroup.com.

FLAG provides program management consulting services in Central Texas for municipal and school capital improvement bonds. FLAG is revolutionizing the construction industry and transforming client expectations by obsessing over the basics of budget oversight, schedule enforcement, compliance, vendor management, and stakeholder communication.

Join our weekly newsletter and receive a free copy of our new book!

JOIN NEWSLETTER

Articles Bonds Capital Improvement Plan Capital Improvement Programs CIP Planning Schedule Technology

The Importance of Completing Projects on Time and Budget in a Rising Interest Rate Environment

Navigating the Challenges of Completing Projects on Time and Budget in a Rising Interest Rate Environment Completing projects on time...
Read More
Articles Capital Improvement Plan Capital Improvement Programs CIP Planning Technology

2024 Update: Impact of Travis County’s Public Improvement District Policy

Travis County's Public Improvement District Policy Update The 2024 update on Travis County's Public Improvement District Policy has brought about...
Read More
Articles Capital Improvement Plan Capital Improvement Programs CIP Planning Process Improvement Technology

Revolutionizing Capital Improvement: The Impact of Artificial Intelligence

The Role of Artificial Intelligence in Transforming Capital Improvement Bond Programs Artificial intelligence (AI) is revolutionizing capital improvement bond programs...
Read More
Articles Capital Improvement Plan Capital Improvement Programs CIP Planning

Get It Right from the Start or Pay the Price: The Urgent Need for Reform in Capital Improvement Bond Programs

The Importance of Starting Correctly on Capital Improvement Bond Programs Starting correctly on capital improvement bond programs is crucial for...
Read More
Articles Capital Improvement Plan Capital Improvement Programs CIP Planning Process Improvement

Book Review: How Big Things Get Done: The Surprising Factors That Determine the Fate of Every Project

How Big Things Get Done: Unveiling the Secrets of Successful Megaprojects “a whopping 91.5% of projects overshoot budgets or timelines,...
Read More
Articles Capital Improvement Plan Capital Improvement Programs CIP Planning Process Improvement

Read or Risk Ruin: 10 Must-Have Books on Capital Improvement Bonds for Taxpayers and Decision-Makers

Essential Reading for Capital Improvement Bond Program Managers Leading a capital improvement bond program intertwines expertise from public finance to...
Read More
Articles Capital Improvement Plan Capital Improvement Programs CIP Local Planning

Time for a Change in Mindset: Why the Construction Industry Must Mature

In an era where innovation and efficiency are the benchmarks of success, it's baffling that the construction industry still operates...
Read More
Articles Capital Improvement Plan Capital Improvement Programs CIP Local Planning

Avoid These 7 Deadly Sins of Capital Improvement Program Management

Introduction Program managers, project managers, and construction professionals play a crucial role in capital improvement program management. To ensure successful...
Read More
1 2 3 4 5 17