Approving bonds will raise your taxes, regardless what schools and cities say

Arizona law allows most local governments to go into debt through the sale of general obligation (G.O.) bonds.

These particular bonds are backed by the full faith and credit of the taxing jurisdiction — meaning any and all property taxes necessary can be levied to pay the debt service.

Unlike almost any other property tax levy in Arizona, a G.O. bond has no limits on the property tax rate or levy that may be necessary to pay back the bond holders.

The importance of these G.O. bonds to property taxpayers is reflected in the fact that they require voter approval to access.

While most school districts, cities and towns do not rely on G.O. bonds, some taxpayers face these bond requests regularly.

Districts should be fully honest on bonds

Arizona school districts have a record $3.5 billion in bond requests before voters this year.

Ideally, these public debates would be an opportunity for school districts and cities to educate taxpayers of the important role they play in their communities and the projects the bonds will finance.

However, the majority of the campaigns advocating for this year’s G.O. bonds are focused on the cost to taxpayers, not the projects.

Worse, many are peddling the false claim that the new debt won’t raise taxes.

Bond program will help Phoenix: Vote yes on 4 measures

State law requires local governments seeking G.O. bonds to mail a publicity pamphlet to voters explaining the bond request and the cost.

Local governments spinning the “no tax increase” message must hope voters are too busy to open the publicity pamphlet, where the truth about the costs is right there in the fine print.

For example, the campaign for bonds in Gilbert Unified School District is grounded in a no tax increase message, but the legally mandated publicity pamphlet reflects that the new bonds will cost the average homeowner $1,118.

Phoenix Union’s no tax increase message contrasts with a homeowner’s cost of $2,200 in the publicity pamphlet.

Extending the life of taxes is a tax increase

Adding to the disservice being done to taxpayers with these campaigns is the reality that these taxing jurisdictions would not be able to sell these G.O. bonds if there was a legally binding prohibition to raising the tax rate necessary to pay the debt service.

In the city of Phoenix‘s last G.O. bond election in 2006, the city made a similar claim that the aggregate primary and secondary tax rate would not increase. That rate was $1.82 and remained as such until 2016, when it jumped almost 20% to $2.17.

This year the city is again wrapping its $500 million request in a no tax increase sales pitch.

Finally, approving a bond request is a finite exercise, not a permanent commitment to pay taxes at a tax rate most taxpayers don’t identify with or understand.

It could be viewed similarly to a homeowner’s mortgage that has a fixed term. After paying down 15 years of a 30-year mortgage, no homeowner could be convinced it would not increase their costs to borrow again and move the mortgage back to 30 years.

That’s essentially what these jurisdictions that are permanently committed to G.O. bonds are selling voters.

Kevin McCarthy is president of Arizona Tax Research Association. Reach him at kmccarthy@arizonatax.org.

This article originally appeared on Arizona Republic: Arizona schools, cities aren't being honest about their bond elections