Use of Bond Proceeds by a School District - New Projects

December 19, 2014 by Enzo Incandela, Associate | James M. Snyder, Partner
Use of Bond Proceeds by a School District

New Projects. Generally, a school district compiles an annual capital improvement budget or prepares a “needs list,” which consists of projects the school district considers to be important by means of its impact on the safety, resources and general well-being of the students and community served by the school district. Capital projects can be funded by federal or state grants and other miscellaneous revenue available for general purpose use. However, the primary sources of district funding to pay for capital projects are generally derived from the proceeds of municipal bonds. Projects involving the acquisition of school sites and buildings, construction of new school buildings and additions, and equipping, altering, repairing and reconstructing existing facilities, are examples of school district projects that are commonly financed with bonds. Thus, generally speaking, if a school district is building a new capital project, it is likely that the proceeds of a municipal bond issuance are financing all or a portion of the project.
Often times capital projects are of long term value to current and future students, as well as residents of the school district (such as new school buildings, maintenance of older facilities, expanding or updating current facilities, etc.). Hence, issuing bonds to fund a capital project allows current and future taxpayers within the district to pay related costs over the life of the project as they avail themselves of the benefits it bestows upon the district.

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