What is involved in issuing bonds?
The theory of bonds is that schools issue promises to pay in the future for money today. These promises to pay are bonds. When a person buys a bond for $5,000 the district receives that $5,000 and is able to use those funds to pay for the cost of construction. The district then pays the person holding the bond some set amount in interest until the bond matures. When the bond matures, the district pays the final interest payment as well as the original $5,000. Because a school district is a tax exempt entity, the interest paid on these $5,000 bonds is considered tax exempt for the person holding the bond. Because of this, a school district can pay a lower interest rate until the bonds are paid in full because the person holding the bond does not have to pay tax on the interest income. When the district sells the bonds, the maturity dates for the face amount of each bond is structured to come due at different times. The bonds with shorter due dates earn less interest. The bonds with long
