California is the most populated state in the United States and has an extensive and intricate education system. At the heart of its education system are school and community college districts. A significant challenge faced by these districts is securing funding for the construction, renovation, and maintenance of school facilities. Where do California school and community college districts turn to improve educational facilities to better serve their student population? The answer: general obligation bond elections. Tony Hsieh of Keygent LLC delves into the process associated with a general bond election.
There are over 1,000 California school and community college districts. Funding for these districts comes primarily from the state, with a bulk of it intended for operational expenses, such as teacher salaries and supplies. Each district operates independently of one another within their designated geographical area. Some districts may be in large urban areas, while others in more rural areas, all with a wide range of demographics and varying in size. As a result, districts all face their own unique needs and challenges within their communities. However, one challenge that most California school and community college districts share is securing funding for the construction, modernization and maintenance of school facilities. This is when districts may seek a general obligation bond election.
Keygent’s Tony Hsieh notes the process of a general obligation bond election is long and requires careful, strategic planning by California school and community college districts along with their financing team. Typically, districts will work with a municipal advisor, bond counsel, and pollster when going out for a bond election. The first step is for a district to identify their needs and estimated cost for those projects. Once they have, typically they will reach out to a municipal advisor, such as Keygent LLC, to help plan a potential general obligation bond program that can provide them with the necessary funding for the determined projects. School districts then present their funding needs to the voters in the form of a bond measure, detailing the specific projects the funds will support, maximum bond issuance amount, and projected tax rates. The voters then decide whether or not to approve the bond authorization on election day.
Keygent’s Tony Hsieh explains: “The requirement for a general obligation bond election to pass varies depending on the type of election. If the bond election is a Proposition 39 election, a 55% approval is required for the election to pass. If the bond election is a Proposition 46 election, two-thirds majority is required to for it to pass.” Achieving community support for a bond election is no easy feat for California school and community college districts. It requires effective communication, transparency and collaboration between the district and its voters. Doing so during the general obligation bond election process helps build trust with voters and foster a sense of responsibility for improving the education experience for students in the community. Typically, prior to placing a general obligation bond measure on the ballot, a district will utilize a pollster to communicate with its voters and to get a sense of what projects, bond issuance amount, and tax rate they would support. By surveying its voters, districts have an opportunity to potentially improve the chances of passing their general obligation bond election.
While general obligation bonds are an important tool for addressing district needs, seeking a bond election may also cause challenges within the community. Since general obligation bonds are repaid through property taxes, the approval of a new bond election may lead to increased property taxes, placing an additional burden on district homeowners. “Balancing the need for funding with the economic situation of the community requires careful consideration and strategic planning on the part of school or community college districts,” explained Tony Hsieh of Keygent LLC. “With the help of a municipal advisor, districts can carefully plan their general obligation bond programs to maintain acceptable tax rates for its taxpayers.”
California's school and community college districts play a vital role in shaping the educational landscape of the state. General obligation bond elections provide these districts with a means to secure funding for essential projects, ensuring that students have access to a safe and modern learning environment. However, the success of these elections depends on the ability of school districts to engage with and gain the support of their local communities. As California communities continue to grow, so too will the challenges and opportunities faced by its school and community college districts, making general obligation bond elections more important than ever.
Keygent LLC is a municipal advisor firm based in El Segundo, California that provides municipal advisory services to California school and community college districts. If you would like to learn more about general obligation bond election planning or to speak with a municipal advisor, please visit www.keygentcorp.com.
