What is the “Tax Price” of new spending in my school corporation?
The “tax price” can be measured as the added taxes that a property owner must pay when the school corporation increases its spending. For example, suppose the school corporation borrows $10 million to build a new school building. It borrows by issuing a bond at an interest rate of 4.5% for 20 years. To pay the interest and repay the principle over 20 years, the corporation would have to pay about $769,000 per year in debt service. Debt service is usually paid with property taxes. The amount to be paid each year is divided by the school corporation’s assessed value to set the debt service tax rate. This tax rate is measured in dollars per $100 assessed value. If the added tax rate is $0.20 per $100 assessed value, and a homeowner has $50,000 in taxable assessed value, he or she would pay an added $100 in property taxes each year. Payment on different amounts are fractions or multiples of this payment. If only one million dollars had been borrowed, the added tax payments would be $10.00.
