Muni Bonds Flashcards
GO bonds
State gov
Local gov
Sales and income tax
Real estate tax
GO bonds
Backed by taxes, full faith and credit bonds. Voter approval subject to statutory debt limit.
Ad valorem tax is:
Assessed valuations on property tax
Limited tax bonds
Are general obligation bonds where the municipality puts a statutory limit on the tax rate that may be levied - require voter approval
Overlapping debt is
Is debt which more than one municipal entity is responsible. Only occurs at local govt level: library distract, school and park district
NEVER AT STATE LEVEL
Revenue bonds
User charges, lease payments, license fees special or excise taxes cigs or liquor.
Feasibility study
Prior issuance of revenue bond. Will do study to determine estimated costs and revenues of the project. Construction expenses, service charges and estimated number of users
For feasible study an indenture agreement __________when analyst does a study
Not a factor
Double barreled bonds
Revenue bonds backed by the full faith and credit of a municipality. Secured by 2 or more sources of income. Safely is greater than just one revenue bond
Trust indenture
Rights and duties of the municipality and trustee, trustee BONDHOLDERS, includes bonds reserve fund needs and rate schedules. Prepared by bond counsel
Protective covenants
Revenue bonds issued with agreements or covenants to do certain things during the life of the bond
Maintainence covenant
Facility maintained in a good operating condition.
Debt service or rate covenant
Charge rates that are sufficient to meet all financial requirements, doesn’t cover sinking funds
Insurance covenant
Protect investors from Damage of facility CATSTROPHIC CALL COVENANT
Flows of funds provisions
States how revenues are applied.
Bond indenture/trust indenture
Describes the rights and duties of the municipality and trustee, trustee represents the BONDHOLDERS
A bond indenture is a contract between
Also known as the trust indenture act is signed by the issuer and trustee
Diversification of a municipal bond portfolio is least affected by
Denomination refers to the value of the security, for municipal bonds it is $5000
The printed statement on a municipal bond that concludes with the bonds are valid and binding obligations of this municipality is furnished by
The legal opinion is obtained from an independent law firm hired by municipality
Which of the following is attested to by the legal opinion on a municipal security?
Determine the tax exemption and legality of the issue
Which of the following is generally quoted as a bid and asked price?
Revenue term bonds which the bid and ask are their “dollar price”
The supply of securities of the issue in the secondary market….credit rating
Credit rating refers to the ability of the issuer to pay principal and interest thus bonds in secondary market would have no effect on credit rating
A customer is retiring in 2015 and is interested in income and having her principal available at retirement. Which of the following municipal bonds would probably be best recommendation
PHA Bond maturing in 2015, he needs this because this is maturing in this year and best because PHA are highest quality and backed by USGovt
The ratio of direct and overlapping debt to property valuation would be used in the credit analysis of which type of municipal bond?
Overlapping debt only applies to GO bonds at the local level
