How does a Bond work?

A municipal bond is essentially a loan. It is a way for municipalities to borrow money and have that money paid back by property taxes. In this instance, it requires a vote of the people to ask for revenue stream to support those repayment amounts.

Fenton Fire District is asking for a general obligation bond issue repaid through a property tax levy. Because this bond is being asked for in November of 2018, the tax would not be added to the payer’s tax roll until September of 2019, for collection for 2020. That is when the payments would start coming in.

Municipal bonds are tax exempt, which helps in lowering interest rates on the borrowed amount. General obligation bonds issues need 57.14% approval to be passed.

The longest term that can be asked for in a general obligation bond is 20 years, which is what would be pursued for on this issue. Bonds are sold in increments of $5,000. Interest is paid semi-annually, or two times per year, and principal is repaid one time per year. Typically March and September are interest repayment dates and March is the principal repayment date.

The state of Missouri limits outstanding debt Fire District’s to 5% of the District’s total Assessed Valuation on a general obligation bond issue.

The bond would require an $0.185 levy. A home with an appraised value of $100,000 would have an assessed value of $19,000 (as assessed by the St. Louis County Assessors Office). This would come out to equal $35.15 per year for this general obligation bond.

For a home with an appraised value of $100,000, one penny of a tax levy is equivalent to $1.90. Because we are asking for $0.185 the math works out in such a way that $35.15 would be the cost per year for a home with a appraised value of $100,000 and an assessed value of $19,000.

Once bonds are approved, it is typically an 8-10 week process before projects may start.