Muni docs

Question 1

If you wanted to find out weather a revenue bond had a gross revenue or net revenue pledge, what document would you look in!

Answer 1

Flow of Funds

• Gross revenue pledge: Debt service is paid first from the gross revenues, operations and maintenance expenses are paid second.
• Net revenue pledge: Debt service is paid second from the net revenues. Operations and maintenance expenses take priority

Question 2

What document would show the authority to borrow, demonstrating the legality for this entity to borrow money via municipal bonds under state and federal laws.

Answer 2

The legal opinion

“The legal opinion will include the following:

The authority to borrow, demonstrating the legality for this entity to borrow money via municipal bonds under state and federal laws.

1933 Act exemption, which states that municipal issuers are exempt from filing registration statements with the SEC.

Tax exemption, which states that the interest from municipal bonds is normally exempt from federal taxation. The legal opinion cites the appropriate laws that support this position.”

Question 3

In a new muni issue, the issuer usually publishes an ad in the ___ (the principal source of information in the muni bond primary market) and this ad is know as a notice of sale

Answer 3

Bond Buyer
Issuer publishes ad in The Bond Buyer

“The issuer publishes an ad in the Bond Buyer (the principal source of information in the municipal bond primary market). The ad is known as a notice of sale. Elements of the notice of sale include:
- Amount and type of bonds to be sold and their purpose.

• Interest payment dates, including the dated date from which the bonds begin accruing interest.
• Identification of the bond counsel (law firm) that prepared the legal opinion.
• The invitation to bid, which gives the specifics of exact location and time for bids to be delivered.
• The good faith deposit, which specifies the amount of a check (which will be credited toward the purchase of bonds for the winning bidder), which are returned to unsuccessful bidders after the bid is awarded.
• A maturity schedule—in the case of GO bonds, maturities are normally serial, while maturity for a revenue bond is usually term.”