E-SPLOST
Education Special Purpose Local Option Sales Tax (E-SPLOST)
An E-SPLOST is a voter-approved, one-cent (1%) local sales tax in Georgia dedicated exclusively to funding public school capital improvements.
- How it Works: It is a consumption tax paid by anyone who buys goods in the county, including non-residents and visitors, rather than placing the burden solely on local property owners.
- Approval & Duration: E-SPLOST must be enacted by a local referendum. If approved by voters, it typically lasts for five years or until a predefined monetary cap is reached.
- Property Tax Relief: By using sales tax revenue to fund capital projects or pay down bond debt, school districts can reduce their reliance on property taxes (ad valorem taxes) to fund these expenses.
Permitted Uses (Capital & Infrastructure)
- Building new schools and adding classrooms
- Renovating aging facilities (HVAC, roofs)
- Upgrading safety systems and security cameras
- Purchasing school buses and transportation
- Expanding technology (student devices, infrastructure)
- Improving athletic, fine arts, and extracurricular spaces
- Repaying previously incurred bond debt
- Instructional subscriptions & licenses
Prohibited Uses (Operating Expenses)
- Teacher and staff salaries
- Employee benefits
- Routine maintenance and daily operations
- Classroom supplies and textbooks
- Utility bills (electricity, water)
- Administrative costs
- Custodial services
Issuing Bonds in Connection with an E-SPLOST
The Time Value of Money
The Time Value of Money (TVM) is the core financial concept that explains the benefits of borrowing with bonds rather than waiting to collect cash. TVM states that a dollar available today is worth more than a dollar available in the future due to its potential purchasing power and the effects of inflation.
1. Construction Inflation vs. Cost of Capital
In public infrastructure, construction inflation (the rising cost of steel, concrete, labor, and land) has historically outpaced general consumer inflation, often running between 5% and 8% annually.
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Scenario A (Wait and Pay Cash): A new elementary school costs $40 million today. If construction inflation averages 6% per year, that same school will cost approximately $53.5 million in 5 years.
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Scenario B (Issue Bonds Today & Pay via E-SPLOST): The district issues a $40 million GO bond today at a 3.5% municipal interest rate. The total cost, including interest paid over 5 years via E-SPLOST receipts, might equal $44 million.
The TVM Conclusion: Because construction inflation (6%) is higher than the borrowing rate (3.5%), borrowing money today saves the school district millions in real purchasing power compared to waiting 5 years to pay cash.
2. Opportunity Cost & Discounted Future Value
By receiving the facility today rather than in 5 years, the district avoids the hidden economic costs of overcrowded classrooms and inadequate facilities. In present-value terms, the societal and educational benefits delivered to students today far exceed the discounted cost of interest paid on the bonds over time.
Why It Can Make Sense
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Debt Relief for Property Owners: Traditionally, bonds are repaid through local property taxes (ad valorem taxes). By pairing bonds with E-SPLOST, the sales tax revenue is pledged directly to pay off the bond debt service (principal and interest). This shifts the debt burden off property owners and onto all consumers purchasing goods in the county (including non-residents).
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Cost Avoidance (Eliminating "Band-Aid" Spending): Delaying construction often forces districts to spend hundreds of thousands of dollars on temporary fixes, such as leasing mobile/portable classrooms or constantly repairing failing building systems. Building early eliminates these wasted operational costs.
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Intergenerational Equity: Capital assets like school buildings last 30 to 50 years. Borrowing allows the cost of the asset to be paid over time, ensuring that future residents who benefit from the facilities also help pay for them.
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Balancing Major Projects with Ongoing Maintenance School districts rely on incoming E-SPLOST funds for continuous maintenance, including roof repairs, HVAC upgrades, school bus replacements, and technology refreshes. Bonding for flagship capital projects ensures these routine maintenance needs remain fully funded.
When It Can Make Sense
- High Construction Cost Escalation / Inflationary Environments If building materials, labor, and land costs are rising faster than borrowing interest rates, waiting to accumulate cash significantly reduces purchasing power.
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Low Municipal Interest Rate Environments When tax-exempt municipal bond rates are historically low, the cost of borrowing is minimized, making upfront financing far cheaper than delaying construction.
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Major Systemic Infrastructure Upgrades Large-scale projects—such as county-wide safety upgrades, technology overhauls, or replacing 50-year-old HVAC systems—require massive lump-sum payments that cannot be incrementally funded.