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45 Cards in this Set
- Front
- Back
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Muni |
-municipal bond -book entry 0 certificates issued -exempt from Fed: and can be subject to state and local -serial maturities -issued at par interest semi annually -State Munis: backed by income and sales tax -Local Munis: backed by property tax |
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Legal Opinion |
-all munis have legal opinion printed on them -bond counsel is retained to examine validity, legality, and tax-exempt status |
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unqualified opinion |
-everything is ok |
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General Obligation |
-backed by the faith of the of the taxing power of the issuer -typically ad valorem (property tax) |
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G.O. :Limited Tax Bond |
-limit placed on the rate that the issuer can assess taxes -have more credit than unlimited tax bonds and sell at higher rates |
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Mill Rate |
-ad valorem is based on a muni's "millage" -one mill = .001 ex: a muni has a tax rate of 7mills on a property worth 100k = 100k * .007= 700$ |
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Constitutional Debt Limit |
- if a muni hits its limit the only way that it can issue more GO bonds is by public referendum |
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CAB: Capital Appreciation Bond |
-a zero coupon muni -the discount is treated as the principal -allows the muni to lower increase the debt limit since the discount is the principal and not the par value |
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Revenue Bonds |
-bond backed by a source of revenue not by the taxing power of the muni |
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G.O: Debt Statement |
-outlines issuers total bonded debt =(Gross Direct Debt) - (Sinking Fund Deposit) =(Net Direct) + (Overlapping Debt) |
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GO: Gross Direct Debt |
=all indebtedness of issuer |
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GO: Sinking Fund Deposits & Self Supporting Debt |
-$ held in deposit of sinking fund lower the issuers debt obligation -Self-supporting debt of the muni is also subtracted from amount of debt supported by the tax payers |
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Net Direct Debt |
=amount of debt of issuers that is responsibility of the tax payer |
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Overlapping Debt |
-issuers share of debt of other governmental bodies with same of overlapping geographical boundaries -school district with three separate towns |
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Total Net Direct & Overlapping Debt |
-true liability of issuer to be paid from taxing power |
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Debt Per Capita |
Net Overall Debt/ Population |
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Collection Ratio |
= taxes collected/ taxes assesed -if lower than 90% municipality cannot collect taxes |
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RB Debt Service Coverage |
=Pledged Revenues/ Debt Service Requirements -should be above one indicating enough revenues are available to meet debt service requirements |
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Muni Insurance |
-munis that are insured are rated AAA -private companies who insure munis are: AMBAC/MBIA/FGIC/FSA |
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Trading Munis |
-OTC -interest is Federally tax exempt -if purchased by resident may also be state exempt |
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Bloomberg |
-electronically publishes dealer listings -serial bonds quoted on yield basis |
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Muni Broker's Broker |
used for large transactions -keeps original broker anonymous |
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Firm Quote |
-dealer will honor that price |
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Nominal Quote |
-dealer gives an approximation -not the actual price |
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Workable Quote |
-quote given by 3rd party dealer |
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Round lot |
-Muni Fv 100k -Corp Fv 5k |
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Secondary Market Joint Accounts |
-to handle large muni transactions -has an appointed manager to the account -only one quote is allowed to be published |
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RTRS Real Time Trade Reporting System |
-trades in muni bonds must be reported on real time basis within 15min of execution |
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EMMA |
-Electronic Muni Market Access -RTRS reports are fed into EMMA -maintained by the MSRB |
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Settlement and Accrued (i) |
-30/360 days basis (like cbonds) -regular way 3 bdays -interest on NOTES is actual day/actual basis |
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Muni Tax Status |
- exempt from Fed subject to state & local -triple exempt if from if purchaser is a resident of the state -muni yields are lower than corp because they are not taxed and therefore do not expect compensated |
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Equivalent Taxable Yield |
= (Tax Free Yield)/ (100%-Tax Braket) |
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Public Purpose Bond Issue |
-issued to meet basic gov functions (schools and roads) -interest income exempt from Fed |
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Qualified Private Activity Bond Issue |
-not associated with issuing gov, but instead the proceeds are to provide a public benefit ex: sewer system pollution control ect -exempt from Income Tax, but subject to min alternative Min tax |
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Non Essential Use, Private Activity Bond Issue |
-issued to finance a private party: not the gov or general public ex: football stadium, convention center -fully taxable |
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Tax: Industrial Development Bonds |
-lease payments by the corp are tax deduct and are used to fund the i payments made on the outstanding debt -if purchaser is a substantial user of the facility then it is taxable |
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Bank Qualified Muni Issues |
G.O. bonds of 10mil or less are qualified to be purchased by a bank -bank can deduct 80% of interest carrying costs of deposits used to buy bonds -100% Fed Tax Free |
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Positive Carry |
- (i) on monies borrowed to buy bonds is less than interest earned -bank is making money on the interest earned |
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Negative Carry |
-(i) on money borrowed to purchase munis is greater than the (i) received from the tax free munis |
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Revenue Bonds |
-self-supporting debt |
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Bond Contract |
-prepared by bond counsel -includes Bond Resolution which allows the sale of securities -includes trust indenture |
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RB: Protective Covenant |
-included in the bond contract -outlines expectations of the issuer to the trustee |
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Maintenance Cov |
-promise to maintain facility |
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Rate Cov |
-promise to maintain fees for using the facility at high enough level to cover the debt |
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Segregation of Funds Cov |
- promise to keep rev collected and monies expended on running the facility separate |
