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What is a bond issue?
A bond issue is a way to borrow money to fund capital projects. This requires voter approval. Capital projects include building new schools, school renovations and certain technology costs.

Where does the money come from to pay for them?
When the voters pass/approve the bond issue, the school district then obtains bids and sells bonds to the purchaser that offers the lowest interest cost.

The district pays back the debt over a period of years, typically around 12 years. We use current tax dollars to pay off bond debts. In Rockwood, that debt service comes from a dedicated 75 cent property tax levy.

This process is similar to a home loan. When you purchase a home, you borrow money at a specific interest rate. You make payments on that loan, which include principal and interest, over a period of years. In order to make those payments, you dedicate a certain amount of your income to retiring that debt.

How can we do this without increasing the tax rate?
Each year, the district retires or pays off old debt from previous bond issues and our assessed value grows. As that happens, we are able to fund new debt from the existing 75 cent levy without increasing our tax rate.

This is similar to what happens when you take out a home equity loan. You continue to make those monthly payments, which have not increased, but you have “added” new debt, which extends the period of time it will take to pay off the entire loan.

Why does Rockwood continue to issue bonds?
This method of funding allows us to pay for capital projects that have a length of "life" that is similar to the "life" of the loan.

The district has over 3 million square feet of facilities valued at over $350 million. These facilities require regular maintenance, upgrading and renovation.

What can the bond money be used for?
The money from bond issues can ONLY be used for capital expenditures such as: building new schools, school renovations and major technology costs.

Bond funds MAY NOT be used for operating expenses such as: salaries and benefits, transportation costs, utilities, textbooks or other supplies.

Why aren't these expenses included in our operating budget?
Ten or more years ago, all ongoing major maintenance projects and technology were funded by the district’s operating budget.

We made a conscious decision to supplement the funding of major maintenance projects and some technology costs with bond issues because:

• District enrollment growth slowed (fewer facilities were required).
• Operating revenue growth slowed (creating a pinch on our operating budget).

If all the money for these certain expenses had to come from the operating budget, we would have to make adjustments to that budget.

Most of our operating budget– 81%- is allocated for employee salaries and benefits. Only 3.7% is allocated for capital outlay.

Will any of the bond issue funds go toward areas other than building needs?
Although building needs are important, many people I know are more interested in finding the funds to hire experienced teachers of exceptional quality to educate their children. Bond issues, allow Rockwood to free money from our annual operating budget to provide for needed building maintenance and capital improvements, so we can keep a higher percentage of our operating budget to pay for teacher salaries and benefits.

The state of Missouri makes it very clear that the money from bond issues can ONLY be used for capital expenditures such as: building new schools, school renovations, and technology costs. By law, bond funds MAY NOT be used for operating expenses such as: salaries and benefits, transportation costs, utilities, textbooks or other supplies.

Rockwood has different kinds of budgets--just like your own family. In Rockwood, we have two separate funding sources:

• the annual operating budget paid from the operating levy, and
• bond issues that are paid for out of our debt service levy.

Annual Operating Budget is funded from our operating tax levy fund currently about $3.25. Most of the money in the operating budget (71.0%) is dedicated to teacher salaries and benefits. Money for daily maintenance and cleaning of our buildings is a smaller percentage (13.2%) of the annual budget. Other expenditures include items such as transportation costs, books, supplies, and school support also come out of the operating budget.

Major maintenance projects and capital improvements are funded by bond issues. Bond issues are financed over a period of time, typically around 12 years. This means that the cost of capital improvements, such as additional classrooms or a new roof for a school, can be extended over several years. These bonds are paid off from the debit service fund, which is set at .75 and does not change year to year.

Ongoing maintenance and improvements are needed for our facilities. The first Rockwood school was built in 1934. Our newest school was built in 2004. If you looked at all Rockwood schools by square feet, you would discover:

• 1/3 are between 30 - 70 years old
• 1/3 are between 10 -30 years old
• 1/3 are less than 10 years old

Aging schools mean that roofs, heating and cooling systems, floors and carpet have to be replaced. Renovations and additions are required to meet changing needs and demands of education. Bond issue funds allow us to take care of these needs without using money in our annual operating funds that would take money away from teachers.

What is the difference between a bond issue and a tax levy?
A bond issue is used when a school district wants to build schools, make capital improvements or purchase large amounts of equipment. The operating tax levy provides funds for operating the schools, paying staff and educating students.

A bond is essentially a long-term loan and is similar to a home mortgage. In effect, Rockwood is given an advance by investors who purchase District bonds. In return, Rockwood promises to pay the investors a specific rate of interest on their funds until the principal part of their original loan has been completely repaid, generally during a period of 12 years or less. Bond issue funds for technology are repaid during a period of 5 years or less.

On the other hand, normal operating funds are received from the operating tax levy, a separate voter-approved levy. This fund pays for salaries, utilities, supplies, etc.