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Bond payments

Page history last edited by Kim Miller 10 years ago

 

 

March 17, 2014

 

Question

 

Laura Stone (AZ)

 

I’m thinking we’ve chatted about this, but am not finding it on the Wiki: Where do we record bond payments for construction? I’m thinking it’s under Capital expenditures, and we just record the amount year after year?


 

SDC Comments

 

Susan Mark (WY)

 

I hesitate to comment, for  fear that I've been doing it wrong, but I'm goin' in.

My feeling is that bonds for capital improvements, other than the interest, are not revenue or expenditures.

If I get a cash advance on my credit card, I don't consider it to be income. A bond is simply the library borrowing money. The revenue is when the county (in our case) collects the tax receipts and that the expenditure is what is spent on the actual capital improvement as it happens. The interest on the bond would be a capital expenditure, but the principle would not.

 

OK, throw staplers at me now....


 

Scott Dermont (IA)

 

But my understanding is that the library is not paying the interest on the bond, the taxpayers are. So I would not include bond payments or interest payments on the survey. The way I see it is the taxpayers vote to pay for the bond issue and the interest. Once the bond issue passes, the library receives the capital income from the county or city, which is reported on the survey as capital income. Then the library expends the capital on the building, which is included on the survey as capital expenditure. But the library does not pay the interest, nor does the library pay back the principal of the bond.


 

Susan Mark (WY)

 

That makes more sense on the interest. Thanks for the clarification, Scott.


 

Laura Stone (AZ)

 

Is it always such that there is a corresponding tax increase? Or are there cases where the governmental entity agrees to absorb this payment into existing revenue streams?

 


 

Susan Mark (WY)

 

There may be, but I wouldn't think that would make a difference in terms of how revenue/expenditures would be handled. It's still borrowed money, whereas the revenue that's being used to pay it off is the actual revenue. The actual expenditures is whatever you're spending it on.


 

Scott Dermont (IA)

 

I would think that it depends. I have a lot of libraries that have a capital fund that is paid into each year to cover things like broken furnaces or leaky roofs. Depending on what it is, we may or may not have them report it as a capital or operating expense on the survey. But for their purposes, these are all considered capital expenses, and in some cases are quite expensive. I assume that this is coming from the regular general fund. I would think the bond issues with a tax increase would be for things like major building expenses like an expansion or new building.


 

Michael Golrick (LA)

 

What Ann said. In fact I have a couple libraries who did this, including one which paid off the bonds early in the past year or so.

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