It’s election day and while I’m fairly clueless about those running for school board, one item on the ballot caught my eye. The local community college has put up a bond measure for the vote to “upgrade facilities.” You can probably guess how I’m going to vote on that.
If you know what a bond is, then ignore the rest of this e-mail, with my apologies. However, from my brief stint as a financial planner, I discovered that most people do not know what bonds are. Here’s a quick overview:
Bonds are loans. When you vote on a bond measure, you are voting to borrow money and that money must be paid back, with interest. Revenue bonds are issued by municipalities for projects that are projected to generate money and those funds will repay the loan. E.g. if the muni bond was used to build an airport, income from the airport would be used to repay it, (unless the airport goes bankrupt and then the taxpayers must pay). The other common type of municipal bond is the general obligation (or GO) bond. With a GO bond, the taxpayers are on the hook for the money. Period. It’s used for things like high schools and such. So when you vote on a GO bond, you’re increasing your town or city’s expenses down the road (plus interest) and you will pay.