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KBTX | Bryan & College Station, TX | News, Weather, Sports

What is a Bond?

By: Jennifer Cavazos
By: Jennifer Cavazos

Over the course of the last year...numerous bond elections for area school districts have been voted on. But do voters know what they're really voting for and against. And do they really know what a bond is?

Bryan ISD is hoping voters approve a bond issue next month..to help fund a new high school and improve existing schools among other things.

A bond is basically like a loan from a bank where the district, city or county borrows money from a number of investors that purchase the bonds.

David Blackwell, with the Mays Business School at Texas A&M says, "The school district, city or whatever entity your talking about, will have to generate cash flow to pay interest on due dates...typically with a bond, that's every 6 months."

It's the taxpayers who are ultimately responsible for making the payments on the bonds. It just happens later than say, a tax increase.

Blackwell says with a bond, your taxes won't go up right away. They could, however increase 10 or 15 years down the road. The risk is that no one knows what the market will look like when that time rolls around.

"The principal of bonds will have to be paid off--and that's a large amount that typically is not due for a long time, maybe 10, 15 or 20 years...depending on structure." says Blackwell.

Unless there's a major economic depression in the area...its unlikely a bond wouldn't be able to be paid off. And if there is a need for improvements or expansions, you have to pay for it somehow, and bonds are the typical way to go..

"If bonds are issued and improvements are made to the school district, that would make Bryan school district a better place to live. A better place to bring your children to go to school, that could attract people to the area, increase value of property." says Blackwell.

All that leads to an increase in tax bases and Blackwell says in some sense, improvements could pay for themselves.


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