Which statement is true regarding Type I and Type II school district bond arrangements?

Which statement is true regarding Type I and Type II school district bond arrangements?

• A. Type I bonds are recorded on municipal books and paid from municipal Current Fund; Type II bonds are issued by the school district and paid from the school budget
• B. Type I bonds are recorded on school district books
• C. Type II bonds require state approval
• D. Type I bonds are issued by the county

Answer: (A)

Type I and Type II bonds differ in who issues the borrowing and where the debt service comes from. In a Type I setup, a municipality issues the bonds to finance school purposes, and the debt service is paid from the municipal Current Fund, with the bonds recorded on the municipal books. In a Type II setup, the school district itself borrows and the debt service is paid from the school district’s budget, with the bonds recorded on the school district’s books. This distinction is exactly what the statement describes: Type I bonds appear on municipal records and are funded from the municipal Current Fund, while Type II bonds are issued by the school district and funded from the school budget. The other options misstate who issues the bonds, where they are recorded, or how they are approved.

Type I and Type II bonds differ in who issues the borrowing and where the debt service comes from. In a Type I setup, a municipality issues the bonds to finance school purposes, and the debt service is paid from the municipal Current Fund, with the bonds recorded on the municipal books. In a Type II setup, the school district itself borrows and the debt service is paid from the school district’s budget, with the bonds recorded on the school district’s books. This distinction is exactly what the statement describes: Type I bonds appear on municipal records and are funded from the municipal Current Fund, while Type II bonds are issued by the school district and funded from the school budget. The other options misstate who issues the bonds, where they are recorded, or how they are approved.