Playing Smart changelabsolutions.org | kaboom.org 43 for a set number of years or continue indefinitely. State law may impose limitations on the maximum amount of funding a district may request, the frequency with which such requests may be made, how long the special tax may be imposed, and what percentage of voters are needed to approve the ballot measure. While these revenue-generating options are theoretically possible, they may not be practical. For example, in some states, school districts may not have independent taxing authority or may be limited in their ability to generate revenue through special taxes or levies because of caps on property tax or state restrictions on how much debt a local district may incur.45 Moreover, raising local taxes can be a difficult strategy to pursue in communities that lack property or income wealth. And raising taxes at all may not be politically feasible. Bonds46 General Obligation Bonds The most common means of financing schools and other public facilities has been through general obligation bonds issued by school districts or other local government agencies.47 The bonds are sold to the public with the promise of repayment with interest, and the proceeds from the bond sale are used to finance the capital costs of the project. Issuing general obligation bonds usually requires voter approval from a simple majority of the electorate – and sometimes even a supermajority – to pass the bond measure. States may also issue general obligation bonds to support joint use of schools. The bond revenue can be used to fund competitive grant or loan programs that local school districts may use to finance facility improvements for joint use projects.48 (A description of grant programs follows at the end of this chapter). In many communities, raising taxes can be difficult. Many voters no longer have school-age children, so they have little incentive to support bond measures for school facilities improvements and the tax increases that result.49 If, however, the bond campaign can emphasize that funds will be used to construct or renovate school facilities for shared community uses – such as a school-based senior citizen center or a school/community swimming pool – voters may be more likely to support the measure, because they see the improvements as benefiting themselves and the broader community.50 Revenue Bonds A revenue bond is another option to fund capital costs of an income-generating joint use project. Like a general obligation bond, a revenue bond is issued by a government entity, but it differs in that it can only be repaid from the revenue generated by the specific project it was issued to finance (e.g., tolls from a bridge, ticket sales from a local stadium, parking fees from a public parking lot).51 A revenue bond is an appropriate funding mechanism only when a feasibility study has been done to verify that the project will generate enough income to pay back the bond debt obligation. Qualified Zone Academy Bonds Qualified Zone Academy Bonds (QZABs)52 can be used to pay for renovations, repairs, and other improvements needed for a joint use program.53 The major benefit of this federal program is that the school districts issuing QZABs pay no interest. Instead of the school district paying back the amount of the bond plus interest to the bondholder (as is the case with a general obligation or revenue bond), the federal government actually issues a tax credit to the bondholder in lieu of the interest the bondholder would otherwise have received. This amounts to an interest-free loan for the district and can save up to half of the project costs.54 Each state’s education department receives an annual allocation of QZABs from the federal government that can then be issued to local school districts.55 Since the funds are very limited, a school district must apply to the state for authorization to issue the bonds, and each state’s application process and criteria are different. Schools or districts with 35 percent or more of their students eligible for free or reduced-price school meals or districts located in empowerment zones or enterprise communities56 may apply for this federally sponsored program. A school or district must raise at least a 10 percent match from community partners, such as a business or nonprofit organization, which can be cash or in-kind. A school district has 15 years to pay back the QZAB, which it could do through its general operating budget or via a voter-approved general obligation bond.
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