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Correction: Total School Bond Interest Will Be $25 Million

I had previously written that the total school bond interest would be $44 million. A reader corrected me and indicated that bond interest would likely be in the $25 million range… I will post his information below:

You need to go look up how amortization on a loan/bond works, because this isn’t it. So yes, you are wrong, and I will correct you. A 20 year bond like this one is entirely extinguished by the fees paid by the end of the 20 year period, so the balance due (and interest paid) drops each year. If you are unfamiliar with the concept of amortization here’s a quick primer:

It’s like your mortgage (unless you have an interest only or balloon mortgage) – you don’t pay 4% interest on your principal every year for 30 years and THEN have to pay off the principal at the end (though many mortgages prior to the 1930s worked that way).

Interest costs @ 4%/20 year amortization for a $56 million bond will be around $25 million. Of course in many cases bonds/loans are paid off ahead of schedule – if revenues exceed expectations, the district could decide to retire the bond early. Or they could use the money for other purposes and continue paying the bondholders on schedule.

Regardless, yes, more students and aging infrastructure do cost money, if not quite as much as you’re estimating here. In general, bond issues are often “the largest ever” simply due to inflation and population growth. In inflation-adjusted dollars, we’ll be paying less in taxes than we were a decade ago, though.

What’s your alternative proposal?

I do hate when I get things completely wrong but appreciate when people let me know. Thanks to this reader for pointing this out and I apologize to the public for posting incorrect information.


1 Comment


I think you fell on your sword too quickly on this one… Municipal bonds, like most other bonds, do *not* amortize like mortgages and other consumer debt. Rather, they pay regular interest payments (coupon) during the span of the bond, and then return the face value upon maturity. To plan ahead for the maturity cash flows, many municipalities will create sinking funds to accumulate the cash over time that will need to be repaid as principal at maturity, or they will seek to repurchase the bonds on the open market. However, as we all know, the interest gained by investing cash tends to be lower than the interest paid on debt, so there will likely be a net interest expense remaining unless higher levels of risk are taken on the investment side.

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