During the past election cycle, my local school district has put up signs, signs and many more signs encouraging people to vote for yes in the referendum to issue new local government bonds to improve the district’s infrastructure.
Most people don’t care or understand how this process works. Not this guy. I was interested and dived deep into how the whole thing unfolds. The perspective of school, Wall Street, and parents. I understood it all. Just call me…
In the 2024 election, the county school bulletin boards circulated clever things PowerPoint Slide A deck that outlines plans for school improvement (nothing changes).
Their pleas were simple. The district is growing rapidly. You will need a new school!
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They want to grow accurately $39,441,428 By selling bonds, building one new school in the district and starting plans for the construction of a second school
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Starting in 2026, the district will begin annual payments for $4,077,755 Provides services to pay your debts
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These annual payments are made by increasing property taxes $8.00 per $100,000 Listed rating value for your home. For example, a $500,000 home would see taxes rising by $40 a year.
It’s easy isn’t it?
Bond referendums are actually quite standard processes for local governments. The previous bond was voted in 2022 and issued one earlier in 2018. The overall municipal bond market exceeded $4.1 trillion in 2023, and is considered a unique asset class due to its own regulations and structure.
a Local bonds It is issued by local governments to fund the needs of the community. There are two types of local bonds.
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Income bonds -Debt Instruments is issued and supported by cash flows generated from the infrastructure used for the build. Think of the toll roads, tolls and stadiums that generate income from concerts and sporting events.
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General obligation debt – A debt instrument used by state and local governments to fund public works projects such as parks and schools that have been paid by collecting taxes on communities.
For bond buyers, the biggest advantage is the tax-exempt status on coupon payments received by bond owners. The size of coupon payments and the risk of these bonds vary, but local government credit ratings generally determine quality and continue to compete with other options such as head office bonds and federal Treasury bonds.
For more information about bonds, please see here –
Electronic Market Access (EMMA) – Emma, provided by the Municipal Securities and Rules Commission (MSRB), is one of the most comprehensive sources of real-time data on municipal bonds. You can find active bonds, disclosures and price history here. Emma’s website.
Bloomberg Terminal – Bloomberg provides detailed information on active municipal bonds, including yields, credit ratings, and pricing.
FINRA’s Market Data Center -FINRA provides bond information including yields and activities of local government securities. You can filter by bond type to see specific municipal bonds. FINRA Market Data.
Assuming the referendum has passed (I did!), the district can issue bonds for the project they are pitching. They reach out to friendly neighborhood investment bankers and begin the paperwork and underwriting process. Before we investigate these mechanics, we’ll talk about the parent/citizen’s perspective next week – as school districts try to issue new city bonds.
Are you interested in joining the Trader Papa Podcast in 2025? Shoot the email! I want you to sit for discussion
thought? question? comment?
Reach out! Maybe I’ll post the full topic or as a Q&A
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