A UTGO bond will be in place for a county in Washington state, in the amount of $5,964,000 (the bond has a 20 year term at the rate of 3.5%). Assuming the bond is voter approved, determine the FIRST-YEAR property tax bill for the bond for the owner of a home valued at $315,000. Assume the total assessed value of property within the District will be $87.1 billion in the initial year debt service would be paid.
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A UTGO (or unlimited tax general obligation) bond is one where the issuing government is obligated to pay for repayment of the money raised by the bond with the help of money earned from property tax.
The question specifies that $5964000 is raised by issuing a bond with a 20 year term and the interest is to be paid at 3.5%.
3.5% of $5,964,000 is $208740. The total value of property within the district is $87.1 billion.
To repay the bond, a property tax of $208740 has to be raised from property worth $87.1 billion. If the same rate of taxation is used in all cases, the property tax that has to be paid by an owner of a home valued at $315000 is 208740*(315000/87100000000) = $0.755
The house owner has to pay a property tax of $0.755
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