Preparing for the Referendum Process
Whether your District has a referendum vote coming up in 2026 or may have one in the next few years, it is helpful to understand the process before it begins.
Since referenda typically happen infrequently for most Districts, many employees may be going through the process for the first time. While it may seem daunting, understanding the different pieces that go into a successful referendum, subsequent bond issuance, and management of the cash proceeds can help make the process smoother.
The Importance of Referenda
Many School Districts struggle to receive enough funding to meet capital and operational needs, so they turn to referenda.
Depending on how the referendum is categorized, these funds can be used for increasing staff pay, adding staff, maintenance, building projects, remodels, and new buildings.
Referenda allow Districts to exceed state-imposed revenue caps, but only if voters approve them.
Taxpayers understand the necessary funding needs for their schools, which is why the majority of Wisconsin’s referenda had passed in the years leading up to the publication of this guide. However, a passing referendum is never a given. Communicating with taxpayers in your District should therefore be a priority before voting.
Capital referenda can be a generational investment into a community. Voter approval is only the beginning, and continued financial stewardship is key to making the most of these pivotal moments.
The Five Key Pieces
Underwriting
Your referendum process should start roughly 12–24 months before going to vote. During this time, you should develop your initial Plan of Finance.
This plan gives you a straightforward way to examine the tax impact of your referendum so you can inform your board and District constituents.
The Plan of Finance is one of the most critical aspects of the referendum process because it dictates the implications for the community.
Other goals of the plan should include staying at or below proposed tax impacts, minimizing total interest cost, minimizing interest-rate risk, and maximizing investment earnings.
Three Key Components
- Maintain flexibility with market timing
- Consider splitting borrowing into two calendar years
- Begin preparation for issuance as early as possible
Once completed, preliminary information can be presented to your board and taxpayers to help them understand the financial implications.
Legal Requirements
Once your Plan of Finance is complete, legal requirements must also be met. Staying on track with these requirements is important to avoid questions regarding validity.
Bond counsel will generally provide a legal opinion on the debt issuance, and the required legal steps must be completed before that opinion can be issued.
The process spans from approximately 70 days before the vote through the days following the referendum.
| Action | Timing |
|---|---|
| Adopt initial & referendum resolutions | 70 days prior to the election date |
| File ballot with County Clerks | 70 days prior to the election date |
| Publish first notice | Within 10 days of adoption of initial resolution |
| Notify DPI | Within 10 days of adoption of initial resolution |
| Information campaign | Ongoing through election date |
| Publish second notice | On the 4th Tuesday prior to election |
| Publish third notice | On the day prior to election |
| Report results to DPI | Within 10 days of referendum |
| Board of canvassers meet | By 9:00 a.m. on the 6th day after elections |
Use of District Funds
The guide also notes strict legal requirements regarding the use of District funds.
District funds can be used for informational materials that provide voters with facts needed to make an educated decision.
However, District funds cannot be used for “express advocacy.” According to the guide, phrases such as “vote for,” “elect,” “support,” “vote against,” “defeat,” or “reject” should not be used in materials funded by the District.
District computers and equipment also should not be used for political or promotional purposes.
Tips for Staying on Track
- Work closely with your referendum partners and team
- Use timelines and make them accessible to the entire team
- Watch for reminders about notice publication dates and other important deadlines
Bond Proceeds Management
Once your referendum has passed—or if you are confident it will—it is time to begin evaluating investment options for the bond proceeds you expect to receive and create an investment plan.
The goal of this step is to avoid leaving money on the table. Because these are taxpayer funds, Districts have a fiduciary duty to minimize risk and maintain adequate availability of funds while seeking competitive investment earnings.
To create a strategic investment plan, it is important to understand how and why rates move. The Federal Reserve is a major driver of short-term interest rates, while inflation, employment, and overall economic growth can influence its policy decisions.
If rates are expected to rise in the short term, short-term investments or fully liquid cash options can provide greater participation in those increases. If rates are expected to fall, longer-term investments can potentially help preserve higher rates for longer.
Investment Options
| Option | Risk / Reward |
|---|---|
| U.S. Treasuries | Government-backed, low risk, lower return |
| Agencies | Implied U.S. government backing, slightly higher risk, slightly higher return |
| Bank Products | CDs, repos, and other bank products with differing collateral and insurance structures |
| Commercial Paper | Short-term unsecured corporate debt, higher risk, potentially higher return |
Building an Investment Strategy
The guide describes several approaches, including keeping proceeds in liquid cash, using a term ladder with different maturities, or combining the two.
A combination approach may work well for many Districts because liquidity needs and construction schedules vary throughout the life of a project.
Building the investment plan around the specific construction schedule can help a District maintain liquidity for vendor payments while also seeking additional interest income over the life of the project.
Avoid Excess Liquidity
Maintaining sufficient liquidity is important for paying contractors and other expenses, but holding too much in immediately available accounts may reduce the opportunity to earn higher yields from longer-term investments.
Diversify Funds
Large bond proceeds may exceed standard federal deposit insurance limits at a single financial institution. Diversifying funds across multiple institutions can help reduce concentration risk.
Construction projects can change, so maintaining adequate liquidity and communicating continuously with outside experts and advisors can help Districts manage schedule and budget changes.
Arbitrage Rebate
For District teams that have not previously gone through a referendum, Arbitrage Rebate may be a new concept.
The whitepaper describes arbitrage as taxable investment earnings in excess of the declared tax-exempt bond yield that may need to be rebated to the Federal Government.
The purpose of these rules is to prevent tax-exempt borrowers from issuing lower-cost debt and investing the proceeds in higher-yielding taxable investments primarily for profit.
Arbitrage rules apply to tax-exempt borrowing and certain taxable obligations and are intended to prevent practices such as issuing more bonds than necessary, issuing bonds too early, or keeping bonds outstanding longer than necessary.
Failure to comply with rebate requirements may result in financial penalties and potentially jeopardize the tax-exempt status of the issue.
Arbitrage Rebate Compliance Best Practices
Debt Payments
The final step of the referendum process is making payments on the debt after issuance.
While a District does not necessarily need a Paying Agent, the guide notes that one can make the process easier by serving as a liaison between the bondholder and issuer, helping ensure payments are made on time, and maintaining documentation.
The Process Has Three Parts
Pre-Closing
Work with your finance team to review and finalize governing documents.
Closing
All parties execute governing documents, the issue closes, and proceeds are received.
Post-Closing
An individual oversees cash, compliance, and the bondholder register and makes debt payments to bondholders.
One of the operational risks noted in the whitepaper is staff turnover. If a person responsible for payments leaves and information is not transferred properly, payment obligations can be overlooked.
Missing payments can affect a District’s bond rating and potentially increase future borrowing costs.
Bringing the Referendum Process Together
The entire referendum process may seem daunting when first looking at the different aspects that go into it.
While each component can be handled internally, outside partners can provide specialized expertise to help make the process easier and keep projects moving smoothly from start to finish.
For many Districts, a referendum is an infrequent event. Working with teams that routinely manage underwriting, legal requirements, bond proceeds, arbitrage compliance, and debt payments can help District leaders navigate the process with greater clarity.
