INFORMATION #3 04-13-2009 - Laserfiche WebLink

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.a ' ' ~ ~_' _ Ehlers -leaders In Publr'c Finance Since X95'5 ~~ oPEB Bonds May H~Ip with Budget Pressures -Page 2 Market Update ---Page 2 Refinance, Restructure, Refocus -Page 3 Are You Conservation Rate Ready? --Page 4 GFOA Recommended Practices on Selecting Financial ., Advisors -Page 5 School District Cash Flow Shortfalls on the Horizon -Page ~ Municipal Bond Provisions in the Federal Stimulus Bill By, Joel Sutter, Financial Advisor Mt~cln of the news co federal stimtilt~s bill in federal spending, r spending provisions, other changes relate general intent of these changes is to make it easier and less expensive for state and Local governments to bot~.•ow money to finance projects, We have summa~•ized preliminary information on some key provisions below. Bank Qualification Tine change that may have tine biggest effect an many of our clients is an expansion of the "bank qualification limit," rn recent years, local gove~~.nments could designate tax-exempt financings as "bank qualified" (or BQ} if they isstxed $10 million or less in tax exempt debt during a calendar year. Since BQ issues rest~It in tax advantages for banks that purchase them, interest rates on tlnese issues are usually lower than on other tax-exempt issues, The bill increases the annual BQ limit from $10 million to X30 million for 2009 and 210, making it possible for many more local governments to issue BQ debt Tlne ultimate effect of this change is uncertain, while BQ issues have usually resulted in lower interest rates, this bill will create a large increase in the supply of BQ issues, which could .reduce or eliminate the difference it1 i~~terest rates, Other Bank Qualification Changes -The bill includes other changes in bank qualification rules which will affect some of ot~r clients, Changes include: allowing 50z(c}(3} organizations to be treated as tine "issuer" for purposes of bank qualification, even if the debt is issued by a larger organization; and allowing bank qualification of larger pooled financings, if the ultimate recipients of the finds each receive $30 million or less. verage about the historic New and Expanded Forms of has focused on the $7S7 billion YIn recent years, the Federal n addition to these dixect allowed several categories o the bill includes a ntrmbe~• of financings, These are issues d to municipal bonds. The investors receive a federal t ^ ^ inter issue ua ^ ^~ little exile The b alloca of the ~ ca - The allocation foi• Clean `Tax. Credit" Bonds - government has f "tax credit" for which ax credit in lieu of est, so debt can be d with either very or no interest nse to the issuer. ill increases bons for several existing categories of tax credit bonds and Renewable Energy Bonds ~CREBs) ~s inc~•eased from $S00 million to $2.4 billion. -The allocation for Qualified Energy Conservation Bonds (QECBs} is inc~•eased ffom $ S00 million to $ 3.2 billion. - The allocation for Qualified Zone Academy Bonds (Q7ABs} for specific types of school improvement is increased from $ 400 million to $1.4 billion. - Anew category of Qualified School Construction Bonds is created, with allocations of $11 billion each for 2009 and 2010, For most of tlnese forms of .bonds, maximum allocations will be granted to each state, and state authorities will be responsible to assign allocations to local governments wino apply, There also are fairly complex eligibility requirements, labor standard requirements, and repayment restrictions for these bonds, So, it may take several months before any of these new forms of bonds can be issued. • Build America Bonds - Tlus is anothet• totally new forth of bond. Local governments which are authorized to issue tax exempt bonds will be allowed to issue taxable Build America Bonds itlstead during 2009 and 2010. An incentive will ~FFDERAL STIMULUS BILL continued on page 6y creates one new tegory of bonds, Managing Yaur Arbitrage is Increasingly Important -Page 6