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Thread: What 72 million buys

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    2015 KatFans.com Supporter old kat 62's Avatar
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    2015 KatFans.com Supporter Tripod's Avatar
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    Tax payers fund this? Or was this via bonds?
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    Quote Originally Posted by Tripod View Post
    Tax payers fund this? Or was this via bonds?
    Read the story...

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    Quote Originally Posted by Tripod View Post
    Tax payers fund this? Or was this via bonds?
    Both. Voter approval, which COULD be interpreted as tax payer approval ...though with the way ad valorem taxes are levied in Texas; voter and tax payer may not necessarily be one and the same. Regardless, it is only the first step. So, what voter approval really means is that the taxing agency, in this case the Katy ISD, is then allowed to issue bonds to raise construction funds.

    On the surface, it would appear that the purchasers of those bonds are paying the tab for the construction. In reality, the issuance of bonds only allows for the immediate and timely raising of the funds. It is like a loan to the Katy ISD. The ultimate entity that is on the hook for retiring the indebtedness created by the issuance of those bonds is; you guessed it ... the tax payers. So when a community votes its approval of a bond issue; who they are really putting the burden on is ... themselves, or at least the owners of property in that community.

    Tripod, it is basically similar to the issuance of a corporate bond. The key differences being; municipal bonds will offer lower interest rates, BUT the dividends are tax free for income tax purposes and the credit worthiness of the agency that is issuing the bonds is based on the ability of that agency to retire those bonds with property tax revenues. Obviously, dividends on corporate bonds are NOT tax free and since the ability of the issuing corporate entity to repay those bonds is based on the revenue stream of that entity, then interest rates are generally much higher on corporate bonds than on municipal bonds. This is to compensate for the higher risk taken; thus the higher the interest rate a corporate bond is paying, the lower is the issuing entity's creditworthiness. i.e. "high yield" is another way of saying "junk bonds".
    Last edited by Dr. OldKat; 11-29-2017 at 12:07 AM.
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  6. #6
    2015 KatFans.com Supporter Tripod's Avatar
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    Quote Originally Posted by Dr. OldKat View Post
    Both. Voter approval, which COULD be interpreted as tax payer approval ...though with the way ad valorem taxes are levied in Texas; voter and tax payer may not necessarily be one and the same. Regardless, it is only the first step. So, what voter approval really means is that the taxing agency, in this case the Katy ISD, is then allowed to issue bonds to raise construction funds.

    On the surface, it would appear that the purchasers of those bonds are paying the tab for the construction. In reality, the issuance of bonds only allows for the immediate and timely raising of the funds. It is like a loan to the Katy ISD. The ultimate entity that is on the hook for retiring the indebtedness created by the issuance of those bonds is; you guessed it ... the tax payers. So when a community votes its approval of a bond issue; who they are really putting the burden on is ... themselves, or at least the owners of property in that community.

    Tripod, it is basically similar to the issuance of a corporate bond. The key differences being; municipal bonds will offer lower interest rates, BUT the dividends are tax free for income tax purposes and the credit worthiness of the agency that is issuing the bonds is based on the ability of that agency to retire those bonds with property tax revenues. Obviously, dividends on corporate bonds are NOT tax free and since the ability of the issuing corporate entity to repay those bonds is based on the revenue stream of that entity, then interest rates are generally much higher on corporate bonds than on municipal bonds. This is to compensate for the higher risk taken; thus the higher the interest rate a corporate bond is paying, the lower is the issuing entity's creditworthiness. i.e. "high yield" is another way of saying "junk bonds".

    Thank you sir for this concise explanation!! I have often wondered how school districts were able to come up with so much money like this (prime example before Katy was Allen School District in North Dallas area)
    Tripod, 1941-1962
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