If “No Tax Increase Bonds” Sound Too Good To Be True, They Probably Are

Officials in the Washington and Hickman Mills school districts have proposed a seemingly lucrative deal to voters—a “no tax increase” bond. Schools get more money, and there is no tax increase. What’s not to love?  It’s actually a bit more complicated than that.

As SMI researchers explained in a blog post and video back in 2014, a no tax increase bond is similar to refinancing a home—it simply stretches debt out over a longer period of time. It looks like there isn’t a tax increase, because the levy itself isn’t being increased; only the length of the bond is. But what proponents often leave out (and anyone who has paid off their mortgage will tell you) is that if the district pays off the bond, it doesn’t have to keep charging the same levy. That is why SMI Fellow James Shuls called it a “No tax levy increase bond” and not a “no tax increase bond”

According to the district, the bond in Washington would help free up money needed to fund area schools that have faced over $2 million in budget cuts due to decreases in enrollment and assessed valuation. In Hickman Mills, the bond would help pay for facility upgrades and renovations. Superintendent Dennis Carpenter has scheduled a town-hall meeting open to the public on March 29 to elaborate on the District’s plans for the facility upgrades and other projects.  The proposal is on the April 5 ballot.

Whether or not these school districts need more money is an open question worth debating, but it is hard to have a productive discussion when the means of collecting that money are so opaque.  Leaders should be honest and transparent with citizens, and taxpayers have to remember that there is no such thing as a free lunch.