What is the Difference Between a Bond and a Levy?

— from Orcas Island School District Staff —

The funding of schools is complicated and often misunderstood. The bulk of the operating revenue comes from the state, the federal government and then through local property tax levies. None of those cover capital projects (that’s why we need bonds). We also are fortunate to have several community organizations that provide much needed support throughout the school year.

Levies help make up the difference between funding from the state and federal government and the actual cost of operating a school district. They pay for educational programs and day to day operations such as:

• Teaching materials and equipment;
• Special Education and gifted programs, drama, athletics, extracurricular activities;
• Utilities, insurance, safety items;
• General building maintenance.

Bonds can only be used for construction or renovation of buildings and property:

• Major repairs such as HVAC systems and water heaters, new roofs;
• Land purchases and improvements;
• Remodeling and expansion.

Bonds cannot be used for basic education.

When a school district places a levy measure before voters, it is asking for the authority to collect a specific amount of money from local property taxes for a set period of time; usually two to six years. When it expires, the programs funded by that levy will no longer have that money. Like a magazine subscription, it needs to be renewed; usually by returning to the voters and asking for another one to replace it. A levy is a direct tax on each property based on assessed value. If the value goes up, the dollar amount of the levy does not increase. Levies are approved if the ballot measure receives a simple majority (at least 50% plus one vote in favor).

When voters approve a bond, they are basically giving the school district authority to borrow money through the municipal bond market and then repay the money to investors with interest, using money collected through property taxes. Bonds are usually paid over a period of 12-20 years and require approval by super majority (60% of the voters).

We encourage everyone to attend our school board meetings, usually on the 4th Thursday of every month at 5:00 pm, where we discuss our challenges, accomplishments, and budget related decisions.

Please watch for levy and bond related information in the upcoming weeks as well.