§ 43731 Refunding Bond Tax Requirements

• •If the government issues new bonds to pay off old ones, and these new bonds take more than a year to mature, they must collect taxes every year.
• •The taxes collected must be enough to pay the interest on the bonds when it's due.
• •The taxes must also create a savings fund to pay back the full amount of the bonds when they mature.

Imagine a city takes out a big loan to build a new school, and they plan to pay it back over 10 years.

The city must collect extra taxes every year to pay the interest on the loan and save up enough money to pay back the full loan amount in 10 years.