Municipal Securities Flashcards
GO Bonds (General Obligation)
Backed by the full faith and credit of the issuing municipality
Need Voter Approval
Used To build non-revenue producing facilities
State Level:
Funded by State Income Tax and Sales Tax
Local Level:
Funded by property tax (also known as ad valorem or value tax)
Ad Valorem
Another word for Property Tax
Is measured in "mills" 1 mill = .001 Mill rate * assessed value = Tax
Overlapping Debt
A Municipal Entity is responsible for paying off all or a portion of the debt that another municipal entity issued
How Are Municipal Bonds Taxed
Interest earned by investors is free from federal tax
And
If resident is in the same state as issuing municipality then its interest is free from state tax as well
Revenue Bonds
- Backed by a specific source of revenue
- No voter approval needed
- Used to build revenue-producing Facilities/Infrastructure
- The bond has to be paid off during the useful life of the facility
Self Supporting Debt
Another word for Revenue Bond
Double Barreled Bonds
A revenue bond that is backed by 2 sources
1. The facility/revenue source
2. The full faith and credit of the municipality will cover any shortfall
IDR/IDB
Industrial Development Revenue Bond)/(Industrial Development Bond
A Revenue Bond Backed by a municipality for a corporation.
The credit rating of these bonds is the credit rating of the corporation.
Special Tax Bonds
Bond is paid off using only money raised by levying a special tax
Special Assessment Bonds
Bond is paid off with money raised through an assessment
Telling those who will benefit from something that they have to pay for it.
Moral Obligation Bond
Municipality can pay off bond if issuer (the facility) defaults
Helps save the credit rating of municipality
PHA / NHA
Public Housing Authority)/ (New Housing Authority
Bond is backed by full faith and credit of US Government (if muni cant pay, then they do)
Safest municipal bond on the planet
Tax Anticipation Note (TAN)
A municipalities short term debt instrument
