Why use a Capital Improvement Bond?


What is a capital bond?

A capital bond is similar to a loan that the Fire District receives funds specifically designed for capital purchases. It can only be used to upgrade capital items and cannot be used for salaries, benefits, or other annual operating costs. In this capital bond, we are asking for $3.5 million over a 15 year period.

What is a capital item?

A capital item is a “hard” purchase or upgrade for a facility, apparatus or piece of equipment. It typically is for items that have long life cycles and are of a higher cost. These items cost more than normally could be afforded out of our annual operating budget. The capital bond can upgrade items that have reached the end of their life cycle, but cannot be used to purchase items that have been broken or for some other reason are not scheduled to be replaced. For example, it can be used to replace a self-contained breathing apparatus (SCBA) air pack, which has a life cycle of 15 years and a cost of approximately $6,000 each. However, an SCBA that is damaged and needs to be replaced after 4 years cannot be funded out of a capital bond.

Why use a capital bond?

A capital bond is a way to purchase needed capital items when reserves are not sufficient to cover the cost of the purchases. This is similar to purchasing a home when you want to buy it now, and pay it off over the next 10, 20 or 30 years. A capital bond is paid for by tax levy on all parcels within the Fire District, so it does not impact normal operating costs in the annual budget. Most of these items would have a profound impact on our annual budget, if they could be afforded at all, and would have a negative impact on the level of services that could be provided. In 2001, the people of the State of Washington enacted I-747. This limited the taxing authority of the Fire District to 1% annually over the previous year. It was widely viewed as the people asking for a say in how the public money was spent. This initiative has made it harder to purchase capital items out of the regular tax levy. We are coming to you in a time of need, and feel that this will fix the needs of the District for the next 15 years and beyond.

1982 Ford Tender
1990 Pierce Pumper

What authority allows for the capital bond?

The Fire District will use a capital bond, or unlimited tax general obligation (UTGO) bond, to pay for capital improvements pursuant to the provisions of chapters 39.36, 39.46 and 52.16 of the Revised Code of Washington.

Do other Fire Districts use a capital bond?

Yes, many other Fire Districts use a capital bond to fund major purchases like the ones we have identified. This has become more common since I-747 was enacted in 2001. Currently, 6 of the 13 Whatcom County fire Districts/Fire Authorities, are using either bonds or levies to meet the growing financial needs. We have chosen to use a bond based on the fact that it is only to be used for capital items and not for operational funding.

Does this require a “super majority” vote?

Yes. As a new funding measure, it will require a 60% yes vote to pass and will need a 40% voter turnout of those that voted in the November 2018 general election.

Will we need another capital bond in the future?

This bond ask is for 15 years. We feel that the equipment upgraded in this project will last longer than that time period. Much depends on growth, demand for service, and mandated by the legislature over the next 15 years, however, we feel strongly that this could be a one-time ask and that future purchases will be able to be scheduled out over the years from general tax monies.

How will a capital bond help me as a property owner?

Upgrading the items that are identified in the capital bond will help the District maintain a high level of service and to stay compliant with State and industry standards. One of the benefits of staying compliant is that we have a much better chance of keeping our current ISO rating. The ISO rating helps determine your insurance rates. As equipment and technology become outdated, there is a chance our ISO rating could slip to a higher number. Presently, we have a rating of 5 in areas where hydrants are available, and a 6 where we need to bring water. If we lose one point in these ratings, it is estimated that your home insurance could go up by as much as 10%. This is even more pronounced for commercial business.

How long will this capital bond be in place?

The capital bond is a 15-year measure and then will be retired, eliminating the levy.

Can I calculate my own capital bond cost?

Yes you can. The formula is fairly simple:

· Take your tax statement and check the assessed value of your properties

· (Assessed value) / 1000 x (bond levy rate)= Capital bond annual payment

· The anticipated cost per $1000 for this bond is $.07

For example, a property with a total value of $300,000 would be: ($300,000)/1000 x .07= $21 annual capital bond payment.

How is the capital bond collected?

The capital bond is collected as part of, and along with, your regular property tax statement.

What will happen if this bond fails?

If the bond issue fails, several things could/may happen. Failure of the measure could result in lowered levels of service. There may be a need to redistribute the firefighters from areas of lower call volumes and responses could take longer to outlying areas. Equipment that must be purchased may take away from programs that we presently offer such as fire prevention and community outreach. It may also require a reduction in staffing at stations where lower call volumes exist, creating longer response times. As mentioned before, it is possible that increased homeowner insurance rates will be seen by citizens of the Fire District.

Overall, these items will help the District in maintaining the present level of service we provide. All of the items listed help firefighters, both career and volunteer, to do their daily work safely, efficiently and professionally. We have worked hard over the last few years to maintain the equipment to, and beyond its maximum life cycle. This bond measure fixes the immediate need and should maintain the present levels of service for many years to come.

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