What's the difference between a bond and a levy?

What is a Levy?

A levy is a tax that is requested on local property owners in order to raise money.  Patrons will be responsible to pay the full amount of the levy because there is no state equalization payment for a levy.  The district will receive the money as taxpayers pay their tax bills.  When the levy expires, the district has the option of asking for another levy.  A supplemental levy can only be for a maximum of 2 years so the patrons generally get a chance to vote on this more often than a bond.  A supplemental levy needs a simple majority to pass and can be used for any lawful expense of the district.

Click for a video explainer on the difference between a bond and a levy.

Why does the school district need a levy?

The funding we receive from the State of Idaho is currently insufficient to meet our needs.  Because we are not funded adequately from the state, we are required to seek additional funding from our local taxpayers.  This is similar to a household that has expenses in excess of one household member’s paycheck.  A second household member would be forced to get a job to pay these excess expenses in order to survive.  We then have two sources of income to pay for all of the household expenses. As a district, we use our state funding and our local tax dollars in our joint district bank account to pay all our expenses. Currently, we are using the local funds to help pay all our expenses and we do not itemize those expenditures.  The district will have to cut expenditures if the supplemental levy does not pass.

The estimated proposed levy rates for Sugar-Salem School District would be:

Tort Levy = $3.02 per $100,000 in taxable assessed value

Supplemental Levy = $40.23 per $100,000 in taxable assessed value

Bond Levy = $301.75 per $100,000 in taxable assessed value

Total Levy = $3.02+$40.23+$301.75 = $345 per $100,000 in taxable assessed value

What is a Bond?

Bonds and levies are two different ways for our school district to raise revenue.  A bond is debt, offered to the public, which must eventually be repaid with interest.  A bond can be structured to be paid back over as many years as the district deems necessary.  A bond requires a supermajority (66.67%) to pass and is voted on before the bond is issued.  A district can have several bonds at the same time, but each must be approved by the patrons.  When a school district in Idaho tries to pass a bond, it may also apply to the state for a special bond equalization payment.  In the case of the bond used for the high school addition, the district qualified for a 29% rebate payment from the state.  This means that our patrons were taxed for 71% of the bond repayment costs and the state picked up the other 29%. The percentage we receive from the state will vary depending upon the following factors within the district:  unemployment rates, market value of the district, and per capita income.  Our district has been advised that our bond levy equalization rate would be between 20% – 29% for a newly issued bond.  This means that if the district passed a new bond, patrons would only pay back between 71% – 80% of the total cost of the projects.

School bonds can be spent to:

  • Acquire, purchase, or improve a school site.
  • Build a schoolhouse or other building.
  • Add to, remodel, or repair any existing buildings.
  • Furnish and equip a building. This includes lighting, heating, ventilation and sanitation facilities and appliances necessary to maintain and operate the buildings of the district.
  • Purchase school buses.

Because these are the only items a district can spend bond proceeds on, it sometimes becomes necessary to issue both a bond and a levy at the same time.