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Why a Bond?

Why a Bond?

I get asked a lot – what is a Bond and why is it needed? A Bond is a funding source for public schools.

Before 1994, Michigan had a long tradition of local control of education and relied on local elections to set millage rates for property taxes which in turn provided most of the funding for local school districts.

Searching for a solution to residents’ frustrations over high property taxes and enormous inequities in funding for local school districts across Michigan, the Legislature put forth to the voters Proposal A to amend the Michigan Constitution. Proposal A was designed to overhaul Michigan’s educational finance system and provide property tax relief.

In March of 1994, Michigan voters approved the Michigan Education Finance Amendment, known as Proposal A. This eliminated the use of local property taxes as a source of school funding and created a new state education tax. School districts began to get per-pupil payments from the state.

So, since 1994, the main source of funding for our schools in Michigan comes from the state and is worked out in the state budget each year. The amount schools get each year is based on the number of students enrolled; this is known as the foundation allowance or foundation grant.

While Proposal A took away taxpayers’ ability to vote to increase their taxes to put money in their schools’ general fund for capital improvements, it does allow local taxpayers to vote to approve the sale of bonds to fund construction, technology, and land purchases, etc. Michigan, unlike some other states, does not have a state fund for school construction, so this provision allows taxpayers to fund major improvements to their local schools.

School bonds work a lot like home mortgages. The basic purpose is to allow the borrower to receive money right away through the sale of bonds and then pay it back over time. Citizens pay back bonds using property taxes. Proceeds from the sale of bonds cannot be used for salaries.

We have structured the Lake Orion Community Schools Bond Proposal so there is no increase to what residents are currently paying. The annual debt millage required to retire all bonds of our district, currently outstanding and proposed, is expected to remain at or below the current annual debt millage of 7.49 mills.

The long and short of it is that the per pupil allocation for operating public schools does not provide funding for major capital improvements. The only way our community can make these kinds of improvements to their schools is through a vote of the residents. 

#Always Lake Orion