Up until recently, Indiana school districts could take out a kind of loan to pay for expensive construction projects or to help them get through rough times. Such a loan is referred to as a bond. Similar to bonds issued by private companies, these are essentially IOU’s issued by the school.
In Indiana, schools cannot issue bonds in excess of 10-million dollars for elementary and middle school construction or 20-million dollars for high school construction projects without voter approval. Bonds are also limited by Indiana’s constitutional tax cap. Without a referendum, schools cannot issue bonds which would cause their total property tax rate to exceed 1-percent for homestead properties, 2-percent for non-homestead residential and commercial properties, and 3-percent for industrial and agricultural property.
There are currently a number of schools hitting the property tax cap because of outstanding debt issued prior to the passage of the amendment.