Ask the editor: Who pays for municipal bonds?

Ask the editorWho pays for municipal bonds?

Between Katy ISD and Fort Bend County, it seems Katy-area residents could be asked to consider approving nearly $827.8 million in bonded debt this November. Neither the county nor KISD is planning to raise its property tax rate to help pay off the debt, so who will foot the bill in the end? The short answer is private investors would pay up front, but the county and KISD would reimburse them later with tax dollars.

The Texas State Securities Board suggests thinking of a bond as a loan with a fixed interest rate and date for paying it all back. Municipalities repay bonds with property tax revenue generated by an interest and sinking tax rate, commonly referred to as its debt service rate.

KISD’s I&S tax rate is $0.39 per $100 valuation and Fort Bend County’s rate is $0.076 per $100 valuation. For a KISD-zoned home in the county valued at $250,000, that homeowner would pay a combined $1,165 toward the entities’ debts this tax year.