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

What is a bond?

Bonds and levies are two different ways for our school district to raise funds. In general, Bond funds are used for Building and Levies for Learning.  A bond is debt, offered to the public, which must be repaid, with interest, over a pre-determined period of time.  A bond can be structured to be paid back over as many years as the district deems necessary.  To pass, a bond requires a supermajority (66.67%) in-favor 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 district 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.

What is a levy?

A levy is a tax that is requested on local property owners.  Patrons are then responsible to pay for the levy over a set period of time and the district receives the money as taxpayers pay their tax bills. When the levy expires, the district has the option of asking for another levy.  A Levy requires a simplemajority (50% + 1) to pass and is voted on by district patrons.  A supplemental levy can only be for a maximum of 2 years so patrons generally get a chance to vote on levies more often than on bonds.  Because there is no state equalization payment for a levy as there is for Bonds, the taxpayers must pay the full amount.

While there are different types of levies that can be used, the most common are Tort Levies and Supplemental levies.  Tort Levies help pay for property and liability insurance costs.  Supplemental levies are needed to supplement the insufficient funding from the State.

While expenses include any lawful expense needed by the district, a supplemental levy is commonly used for the following:

  • Teacher and resource officer salaries
  • Utility bills
  • Textbooks, classroom supplies and equipment
  • Bus operation and maintenance
  • School upkeep and other operating and maintenance expenses