School Bonding Program and Bond Debt Service Discussion
Bond Debt Service Scenarios
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All else equal, two key parameters affecting the annual cost of a bond issue are:
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Term of the issue, in years
Amortization, or structure of principal repayment
Regarding term, bond issues typically are structured to mature (end) on or before the
end of the useful life of the asset; for school construction this is usually 20-30 years
Regarding amortization, principal typically is repaid either in:
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Level annual amounts (the State of Vermont is required to do this by statute)
Increasing installments (like a home mortgage) so that combined principal and
interest payments are level annual (or for a mortgage, monthly) amounts.
Principal typically is repaid once every twelve months, and interest every six months
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Principal and interest payments are also referred to as “debt service"
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