Measure N, as the library bond initiative is called, is one of six local and state bonds Oakland voters will decide on Nov. 7. Like voters all over the country, they will be considering proposals involving billions of dollars of public money — more than $42.7 billion this year, if all the bond proposals on the ballot are added up.

Of all the bond measure dollar figures, measure N’s request for $148 million is the smallest amount Oakland voters will see. If approved, the $148 million would develop two new libraries, rebuild the city’s main downtown branch, and outfit all branches with wireless Internet access. The bond’s supporters say it would benefit Oakland readers of all ages and would create more room for vital after-school tutoring programs.

Sounds promising. But exactly what a bond is — how it works, and where the money comes from when voters approve one — remains confusing to many people, whether they’re being asked to consider $5.4 billion for safe drinking water or $148 million for city libraries.

“I think a lot of voters don’t understand what it means to approve a bond issue,” said Oakland’s finance director Bill Noland. People think a bond is entirely different from a tax, Noland said — that it’s the government’s responsibility, not theirs. For funding big, long-term projects, like the library project, “the heart of it is bonds,” said Noland.

State and local governments have a limited number of ways they can raise money to fund public projects they think are important. “There are only slight variations,” said Noland. They can raise taxes — property taxes, sales taxes, or excise taxes (like taxes on cigarettes or other specific products). They can raise fees — license fees, public utility fees, and tolls for roads and bridges. Or, as in the case of Measure N, they can ask voters to approve what is called a municipal bond.

“A bond is a method of repayment,” Noland said. “It’s a loan done through public entities.”

For state and local governments, the bond process is the same. Officials first come up with an estimate of the project’s cost. “Voters approve the dollar amount, and then we go out and borrow the money,” said Noland. For the library, Oakland would borrow the money from investment banks like Morgan Stanley, Lehman Brothers, and Goldman Sachs. Those banks get the money to give Oakland by selling bond certificates, which are signed agreements that the city will pay back the money it borrows, plus annual interest.

People who buy these bonds are called bondholders. They are individuals who are looking to invest and to make money. “They want safety and security,” said Noland. Investing in municipal bonds is low-risk and tax-free, he said. To offer an incentive for people to fund public projects by buying bonds, state and municipal governments don’t make investors pay tax on interest they earn. The library bond is a 30-year bond, which means that the investors would keep earning tax-free interest far beyond the project’s completion in 2017.

How much is the interest? And how does the government pay it back? This is where the voters come into play.

Noland said that for interest rates, “we try for the four percent range.” Although the city warns voters that the interest rate could be as high as 12 percent, it would vie for the lowest rate from the banks. And while Oakland would need a total of $148 million dollars for the project, it wouldn’t borrow it all at the beginning. “We would start the process with $30 million to $50 million,” said Noland. This way, he said, the city would be using only what it needs and wouldn’t immediately be paying interest on the full $148 million.

What voters don’t realize, Noland said, is that they will help pay the interest on the loan. “I’ve talked to citizens, and they think the city will pay,” said Noland. “They don’t understand that they’ll be paying in property taxes.” A vote for Measure N gives the city the right to raise property taxes to pay back the money it has borrowed and the interest it has accrued.

Money will be coming from the public, said Noland, and this is the very reason that the measure is on the ballot. Voters need to decide if these bonds—called “general obligation bonds”—are worth the cost.

Without the consent of voters, cities may pass other bond measures called “revenue bonds.” These bonds are sold for projects like building airports, power plants, or water and sewer facilities—all projects that, once completed, will generate their own revenue and pay for themselves. The money generated pays back the loan, plus interest.

Oakland’s libraries won’t pay for themselves, so voters have to decide if they want property owners to pay for the project.

Property taxes for the bond would be based on the city’s assessed value of Oakland property and on the interest rates. “The property taxes will fluctuate,” said Oakland treasury manager Katano Kasaine. Because the city would borrow in smaller amounts over time from the banks, the interest rates on the amounts would vary, and the property taxes owners would pay would reflect the rates. The only guarantee would be that the interest rates would not exceed 12 percent, said Kasaine.

The limit for property taxes is 1 percent of what the city determines as the property’s worth, said Alameda County Assessor Ron Thomsen in the county’s 2006-2007 annual assessor’s report. “Anything over 1 percent is necessary to make annual payment on voter approved general obligation bonds,” Thomsen said. That means that if the city says your property value is worth $400,000, you’ll be paying 1 percent of that per year for the regular property tax bill. The 1 percent is broken up into two payment installments, which means that there are two bills per year.

Also on those two bills are what the city calls, “special charges.” These include city services that already got voter approval: increased route services for AC Transit, $24.00 on each bill until 2015; violence prevention services, $44.00 on each bill until 2014; and public education services, $97.50 on each bill until 2009.

Based on the cost estimates of the library project, property taxes would amount to $39.60 for every $100,000 worth of property. Since the average property in Oakland is worth $327,169, said Oakland City Auditor Roland Smith in an August financial report, the average tax would be $119 each year for the next 30 years.

“That’s unreal,” said Measure N opponent Jacquee Castain, who has been volunteering for Elmhurst Library for over 25 years. Castain said that $148 million isn’t enough to complete the project and is too much to ask of an aging community. Castain said that she worried about people “living on limited funds.” The library bond would hit senior citizens with big bills, said Castain. “They’re asking for too much money from people who can’t afford it.”

The city should find alternatives to bonds, said Castain. Grants and fundraisers, Castain said, would boost funding without straining the community, and though they wouldn’t come close to raising $148 million, they wouldn’t have to. “There’s no need to rebuild the downtown library,” said Castain. “The people are in the neighborhoods, they aren’t downtown.”

Castain said that neighborhood branches should apply for grants and turn to local businesses that might be willing to donate funding. “The city already owes too much in bonds,” said Castain. “$1.1 billion in debt.”

Oakland Library spokesperson Kathleen Hirooka said that the city’s library users need the bond. “There are some facilities with no restrooms,” said Hirooka. “The public deserves better.” The average age of library branches is 40 years, said Hirooka, and the facilities aren’t up to the demands of the city’s Web-savvy users.

“Fifty years ago, there were no computers and Internet services in libraries,” said Hirooka. “Now Internet is the most popular service provided.”

Castain said she doesn’t doubt that libraries need updating, but she said it would be more effective if each branch were to come up with a list of its needs and how to meet them.

Ultimately, voters will have to decide whether the city should take on more debt for the sake of the libraries, said Noland. But voters need an understanding going into the polls, said Noland. “Bonds are basically loans,” he said. “They are not a fall-out from heaven.”