Bond levies and tax levies are measures that public entities, typically schools, can use to obtain funding necessary to continue or expand operations. Both types of levies affect the amount you pay in property taxes. However, there are differences between the two that determine how the money derived from these levies can be used, and how they affect taxes.
An entity obtains funds from a tax levy by assessing a percentage of each property owner's property value -- property owners directly fund the costs incurred by the school or other entity. Conversely, a bond levy allows the entity to obtain funds by purchasing bonds, which taxpayers must repay over the life of the bond, which is typically 30 years.
Bond levies can only be used for limited, specified purposes. In the case of school funding, they are typically used to pay for large, one-time projects such as the purchase of land, construction or renovation of schools or administrative buildings. A tax levy is designed to cover ongoing expenses not paid for through state or federal funding -- for schools, a levy might be used to pay teachers' salaries or cover purchases of supplies necessary to provide education.
Length of Levy
Because the life of a bond is typically 30 years, a bond levy usually affects taxpayers for a longer period of time than a tax levy. State laws limit the length of time a tax levy can be assessed. For example, in Washington, the term of a tax levy can be no longer than four years. If the school or other entity wants to obtain funding for a longer period of time, voters must approve a new levy at the end of each tax levy term.
Some states, such as Ohio, permit replacement levies, which extend the terms of an expiring tax levy based on updated property values. A replacement levy can be used to take advantage of rising property values, allowing the school or other entity to receive additional funds for ongoing operations. A replacement tax levy typically increases property taxes paid by residents.
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