Chapter 16 – Municipal Bond Markets BA 543 Financial Markets and Institutions

Chapter 16 – Municipal Markets State, County, and Local Agencies that Issue Debt State, County and City Governments Agencies School Districts Fire Districts Sewer Districts Airports, Port Authorities, etc. Taxed Advantaged (Interest not Capital Gain) Purpose – Short Term, Long-Term or Specific Project

Chapter 16 – Municipal Markets Tax Backed Debt Issuer has general or specific taxing abilities and pledge the “revenue” from their taxing authority to pay off debt General Obligation – Unlimited and Limited Special fees or special charges If both used – double barrel Potential Support Moral Obligation Bonds Appropriation Backed Bonds

Chapter 16 – Municipal Markets Revenue Bonds Specific Revenue from “project” is obligated to pay off debt School Bond Issue – OSU Dormitory Bond  Revenue from Room and Board Fees paid by students dedicated to paying off bond  Short-fall on fees Hybrids Insured Bond – Commercial Insurance Prerefunded Bonds (Trust Portfolio) Asset-backed (matched to sales tax, etc.)

Chapter 16 – Municipal Markets Municipal Notes (Up to 3 years) Short Term borrowing – Bridge Financing TANS (Tax) RANS (Revenue) GANS (Grant) BANS (Bond) Redemption Features Serial Call Prepayment Options

Chapter 16 – Municipal Markets Other Features Bond Ratings Tax Risk Changing Tax Rates Loss of Tax Status Default Problems New York City WPPSS (Washington Public Power Supply System) Orange County California

Chapter 16 – Municipal Markets Primary Market Generally Bid Process with Underwriter Secondary Market Dealer Market 2000 – Start of Internet Auctions and Sales Regulation of Municipal Markets Exempt from 1933 and 1934 Security Acts Brought Back “under” SEC in 1975 Security Amendment Act SEC Bond Disclosure Rule 1989