Through the previous election cycle, my native college district put up indicators, indicators and extra indicators encouraging us to vote YES on a referendum to challenge a brand new municipal bond for infrastructure enhancements within the college district.
Most individuals both don’t care or don’t perceive simply how this course of works. Not this man. I bought and did a deep dive into how the entire thing performs out. The varsity’s viewpoint, Wall Road’s viewpoint, a Mum or dad’s viewpoint. I figured all of it out. Simply name me….
For the 2024 election, the County Schoolboard circulated a nifty PowerPoint slide deck (somethings by no means change) outlining their plan for college enhancements.
Their plea was easy: The district is rising quick; we’re going to want a brand new college!
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They wish to elevate precisely $39,441,428 by promoting bonds to construct one new college within the district and to start out planning the construct of a 2nd college
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Beginning in 2026, the district will begin making annual funds of $4,077,755 to service the debt funds
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These annual funds shall be made by rising property taxes by $8.00 per $100,000 on your private home’s listed appraisal worth. E.G. a $500,000 dwelling would see taxes go up by $40 per 12 months.
Easy sufficient proper?
Bond referendums are literally a fairly commonplace course of for municipalities. A earlier bond was voted on and issued in 2022 and one earlier than that in 2018. The municipal bond market as an entire was over $4.1 Trillion in 2023 and is taken into account it’s personal asset class for its distinctive provisions and construction.
A Municipal Bond is issued by a neighborhood authorities to finance the wants of a neighborhood. There are 2 kinds of municipal bonds:
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Income Bonds -debt devices issued and backed by the cashflow generated from the infrastructure it’s used to construct. Assume toll roads, tolls bridges, or stadiums that generate revenue from concert events and sporting occasions.
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Common Obligation Bonds – debt instrument that state and native governments use to fund public works tasks, resembling parks and faculties, paid for by levying taxes on the neighborhood.
For the client of the bond, the most effective benefit is the tax exempt standing on the coupon funds obtained by the proprietor of the bond. The scale of the coupon cost and the dangers of those bonds differ however typically the credit standing of the municipality decide the standard and retains rates of interest aggressive with different choices like company bonds or federal treasury bonds.
You may see extra data on fastened Revenue bonds right here –
Digital Municipal Market Entry (EMMA) – Offered by the Municipal Securities Rulemaking Board (MSRB), EMMA is among the most complete sources for real-time knowledge on municipal bonds. You will discover energetic bonds, disclosures, and worth histories right here: EMMA Web site.
Bloomberg Terminal – Bloomberg supplies in-depth info on energetic municipal bonds, together with yields, credit score rankings, and pricing.
FINRA’s Market Knowledge Middle – FINRA supplies bond info together with yields and exercise for municipal securities. You may filter by bond sort to see municipal bonds particularly: FINRA Market Knowledge.
Assuming the referendum passes,(it did!) the college district will get the OK to challenge bonds for the mission they pitched. They may attain out to their pleasant neighborhood Funding Banker to start out the paperwork and underwriting course of. Earlier than we examine these mechanics, subsequent week- we’ll speak concerning the mum or dad/residents’ viewpoint when the college district tries to challenge new municipal bonds.
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