§ 18561 Bond Tax Minimum Requirements

• •The tax must be enough to pay the interest on the bonds every year.
• •The tax must also pay part of the bond amount (principal) that is due that year.
• •For the first half of the bond term, the tax must cover the interest and start saving to pay back the principal later.
• •For the second half of the bond term, the tax must cover the interest and pay back an equal part of the principal every year.

A city issues bonds to build a new park. The bonds last for 20 years and have an interest rate of 5%.

The city must collect enough tax money every year to pay the interest on the bonds. For the first 10 years, the tax must also save money to pay back the principal later. For the last 10 years, the tax must pay the interest and start paying back an equal part of the principal every year.