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Bond FAQs

What is a Bond?

A bond is similar to a home mortgage. It is a contract to repay borrowed money with interest over time. Bonds are sold by a school district to competing investors to raise funds to pay for the costs of construction, renovations, and equipment.

What is a bond election?

School districts are required by state law to ask voters for permission to sell bonds to investors in order to raise the capital dollars required to renovate existing buildings or build a new school. Essentially, it’s permission to take out a loan to build, renovate, and pay that loan back over an extended period of time, much like a family takes out a mortgage loan for their home. A school board calls a bond election so voters can decide whether or not they want to pay for proposed facility projects.

Why do school districts need to sell bonds?

Most school districts in Texas utilize bonds to finance renovations and new facilities. This bond would allow the district to finance additions and renovations without impacting the District’s regular budget items such as school programs, teachers, and staff.

Why can’t RISD pay for these projects with their current budget?

In the current school financial system, large capital improvement projects are typically funded through bonds. This allows for voters to have a say in the process.

How is the District’s tax rate configured?

A school district’s tax rate is comprised of two components: the Maintenance & Operations tax (M&O) and the Interest & Sinking tax (I&S). The M&O tax is used to operate the school district, including salaries, utilities, furniture, supplies, food, gas, etc. The I&S tax can only be used for the repayment of bonds. Bond sales only directly affect the I&S rate.

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How does the RISD tax rate compare to similar districts?

Why Not Use Operating Monies to Renovate?

The Texas school finance system is set up to provide operating funds each year based on the number of students enrolled. Operating funds primarily pay for salaries, utility costs, instructional materials, and other operational materials. The state sets the operating portion of our property tax rate and does not allocate additional operating funds to school districts with the expectation or intention that school districts be able to regularly use funds for capital items like renovation. 

What is the maximum amount a district can ask for in a bond package?

State law allows districts to set a maximum I&S tax rate of 0.50¢. The Board of Trustees wants to leave room to pay back the bond early and to leave room for future renovations that will be needed over the next several decades.

If a bond passes, do we immediately incur debt?

No, debt is only incurred once bonds are sold.

How much money have we spent with companies or organizations for quotes, services, or to learn about a bond?

Several companies have helped us learn more about a bond: a legal entity, a financial advisor group, and a construction management company. Having these three assists makes the bond process proceed more smoothly. We only must pay for their services if a bond passes. These companies usually charge a small service fee for their role in the bond; bond proceeds can pay for these fees.

Can bonds be re-financed or paid off early?

Yes, financial advisors actively work to refinance bonds when market conditions allow for opportunities to refinance.

Yes, bonds can be paid off early – many districts do this to allow future bonds to be passed more quickly.

How long would we need to pay back the bond?

When bonds are sold and debt is incurred, the district will take on the debt for anywhere between 20 to 30 years. With favorable conditions, however, many districts can pay back bonds sooner than that. Our goal will be to pay back the debt in under 20 years.

Who determines the projects and who has the final say on what money is used for?

Projects were determined by inviting various members of the school community to a meeting with a construction team that specializes in renovating schools. Priorities were identified based on need and the ability of renovations to save our district money over time. The Rochelle ISD Board of Trustees has the ultimate say on calling the bond, the priorities of proceeds, timing, and the tax rate based upon the debt.

Has the district explored grants or other sources of revenue?

Districts are fairly limited in methods of generating revenue; the state sets allowed operational tax rates to a substantial degree.

We do have several grants that we are awaiting responses on:

1. HEB School District of the Year Grant ($50,000 award with unrestricted use)
2. Texas Education Agency – Technology Lending Grant (approx. $50,000 for technology)
3. Texas Education Agency – Safety Formula Grant (approx. $30,000-$100,000)
4. Texas Education Agency – Curriculum Grant for Mathematics (approx. $150,000 for curriculum, training, etc.)

Does passing a bond affect other school programs? Could school programs be removed because of a bond?

No, school programs are funded through M&O funds (operating and maintenance). Any program changes experienced within a school district are a result of M&O funding not I&S (bond) funding.

For more information, contact 940-644-2228 or visit rochelleisd.net