What is the difference between tax-exempt and taxable bonds?
Tax-exempt bonds price off of the Municipal Market Data (MMD) curve, which is a daily aggregate of bond pricings from national trading desks and investors. The spread between the taxable curve and the tax-exempt is the net benefit to the issuer. Historically, tax-exempt rates have been 72%-76% of the Treasury rates.
What is a General Obligation Bond?
A general obligation bond (aka full faith and credit bond) is secured by the full taxing power of the taxing body rather than a pledged revenue source. GO Bonds usually offer the strongest credit quality and, therefore, the best rating from the rating agencies.
What is the Moral Obligation?
The moral obligation is a credit enhancement where a revenue bond has the added commitment from the City-County Council to consider appropriation of funds to the Bond Bank to replenish any amounts needed from a debt service reserve fund. To date, the moral obligation pledge has never been utilized by the Bond Bank or the City of Indianapolis. The pledge of the City’s moral obligation is intended to enhance a credit rating to achieve more favorable bond pricings in the capital markets.
What are BANs?
Bond Anticipation Notes (BANs) are short term notes issued to provide interim financing for a project until the permanent bonds are issued. Most documents authorizing bond issues include the ability for local governments/entities to issue BANs.
What is a Qualified Entity?
A qualified entity is a city, county, special taxing district located wholly within a county, and any entity whose tax levies are subject to review and modification by a city-county legislative body under Indiana Code.
Who appoints the members of the Bond Bank Board of Directors?
The Bond Bank Board of Directors is composed of five (5) individuals appointed by the Mayor of Indianapolis. Each director must be a resident of Marion County and serves a three (3) year term and serves without compensation. A director may also not be an officer or employee of the city, county, or any qualified entity.
Is the Bond Bank a part of the City-County government?
No. Pursuant to Indiana Code, the Indianapolis Local Public Improvement Bond Bank is a body corporate and politic separate from the city in its corporate capacity. The Bond Bank is not a city or county agency.
Can the Indianapolis Bond Bank serve qualified entities outside of Marion County?
No. The Bond Bank is prohibited from purchasing securities from a qualified entity located outside of Marion County.
How is the Bond Bank funded?
The Bond Bank is paid for the services it performs on behalf of each of its qualified entities. These services include advisory and management services that happen on a continual and ongoing basis and for services in connection with the review and/or actual purchase and sale of securities.
Does the Bond Bank have a budget?
Yes. The Board of Directors is required to adopt an annual budget on either a calendar or fiscal year basis. In recent years, the Board has approved a budget in December for the following calendar year. The annual budget may be amended from time to time during the year by action of the Board.
Are Bond Bank board meetings open to the public?
All meetings of the Bond Bank Board of Directors are open to the public in accordance with and subject to IC 5-14-1.5 (Indiana Open Door Law). All records of the Bond Bank shall be subject to the requirements of IC 5-14-3 (Open Records Law).
Does the Bond Bank have the ability to levy a tax?
No. The Bond Bank has no taxing power. This is responsibility and duty of the qualified entity.
For more general information about municipal securities and markets, we encourage you to visit the Municipal Securities Rulemaking Board’s (MSRB) Education Center where you can find helpful information on our industry and practices, including a glossary of terms. You can visit the website for MSRB’s Education Center by clicking here.