municipal securities Flashcards
what is the definition of a municipal bond
a debt security by a form of government other than the federal government or an agency of the federal government
what are the two main types of municipal bonds?
- general obligation bonds
- revenue bonds
go bonds are backed by?
issuing municipality (taxes)
do go bonds require voter approval?
required
go bonds limits are subject to?
may be subject to statutory debt limits
describe the underwriting process of go bonds
generally competitive bids
go bonds analysis is based on?
tolerances to taxes, debt statements, and debt ratios
revenue bonds are backed by?
user fees (self-supporting)
do revenue bonds require voter approval?
not required
revenue bond limits are subject to?
may be subject to additional bonds tests
describe the underwriting process of revenue bonds
generally negotiated
revenue bonds analysis is based on?
feasibility studies and debt service coverage ratio
prime source of revenue for go bonds?
ad valorem taxes
how are municipal bonds taxed?
state and locally taxed
what are the two specific go bonds?
- limited tax bond
- double barreled bond
describe a limited tax bond
- go bond
- issued when issuer’s ability to raise taxes is limited
describe a double-barreled bond
- go bond
- bond issue debt funded by project revenues but backed by issuers full faith and credit (taxes)
what are some types of user charges that support revenue bonds?
tolls, concessions, fees from highways, bridges, airports, and parks
describe open-end additional bonds test
is a covenant in a trust indenture that says all investors are treated equally
are municipal bonds callable?
yes
describe the flow of funds in a net revenue pledge
operations paid first then the maintenance
1st - operation and maintenance
2nd - debt service
what are the specific types of revenue bonds?
- industrial development revenue bonds (IDRB)
- special tax bonds
- special assessment bonds
- moral obligations bonds
- public and new housing authority bonds (PHAs and NHAs)
describe industrial development revenue bonds
backed by corporations with lease back payments made to issuer
describe special tax bonds
backed by taxes other than real estate and ad valorem taxes
what is an example of taxes used to pay special tax bonds?
alcohol and tobacco taxes
what is a special assessment bond?
only assess property owners who benefit from the bond issue
what is an example of special assessment bond
public lighting in a city neighborhood (only people in neighborhood benefiting from the light will be required to pay taxes)
describe moral obligation bonds
legislative authority is required to pay back bond holders if revenues are insufficient
what are the two types of PHAs and NHAs
- section 8s
- anticipation notes
describe section 8 PHAs
bonds provide financing for low and moderate income housing and are backed by the full faith and credit of the US
describe anticipation note PHAs
short-term borrowing in advance of receiving funds from long-term debt
describe rating and yield of PHAs
- safest municipal bonds
- AAA rated
- low yields
describe municipal notes
- safe
- money market instruments
- AAA rated
- short-term