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TANs, BANs, and RANs

TANs, BANs, and RANs. Short-term Municipal Financing. What they are. What we’ll talk about. When do I use them? What laws govern them? What information do I need to provide? How do I issue them?. T AX A NTICIPATION N OTES. Borrowing in anticipation of tax receipts

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TANs, BANs, and RANs

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  1. TANs, BANs, and RANs Short-term Municipal Financing

  2. What they are . . .

  3. What we’ll talk about • When do I use them? • What laws govern them? • What information do I need to provide? • How do I issue them?

  4. TAXANTICIPATION NOTES Borrowing in anticipation of tax receipts • RSA 33:7, “Tax Anticipation Notes” • Amounts allowed before and after Town Meeting are different. • After Town Meeting, amounts allowed before and after tax rate setting are different. • Term of up to one year • Not counted in calculation of debt limit • But beware of . . .

  5. ARBITRAGE • Section 148* of the IRS Code has something to say about • how much you can borrow, and • what you can do with the proceeds. Noncompliance can cost you money! * TITLE 26, Subtitle A, CHAPTER 1, Subchapter B, PART IV, Subpart B, Sec. 148.

  6. Section 148 – the beginning . . . • (a) Arbitrage bond defined • For purposes of section 103, the term “arbitrage bond” means any bond issued as part of an issue any portion of the proceeds of which are reasonably expected (at the time of issuance of the bond) to be used directly or indirectly— • (1) to acquire higher yielding investments, or • (2) to replace funds which were used directly or indirectly to acquire higher yielding investments. • For purposes of this subsection, a bond shall be treated as an arbitrage bond if the issuer intentionally uses any portion of the proceeds of the issue of which such bond is a part in a manner described in paragraph (1) or (2).

  7. TANs, cont’d. • Certifications and other information you may be asked to provide: • Amount of collections or levy, as appropriate • Passage of article allowing the borrowing – if continuing resolution, also that it hasn’t been rescinded • Latest town report and/or audit • Cash flow statement and last year’s expenses

  8. Bond Anticipation Notes Borrowing in anticipation of receipt of funds from longer-term (permanent) borrowing • RSA 33:7-a, “Temporary Loans” • Term of up to 5 years • Counted in debt limit calculation unless the purpose is one of the many project types listed in RSA 33:1 • Information: Provide evidence of permanent financing commitment.

  9. ARBITRAGE • You guessed it – same rules apply.

  10. Revenue Anticipation Notes Borrowing in anticipation of receipt of Federal or State grants • RSA 33:7-b, “Anticipation of Federal or State Aid” • Term of up to 5 years • Not counted in debt limit calculation • Information: Provide evidence of grant status.

  11. ARBITRAGE • Here it is again….

  12. Other Items for All Notes • Attorney’s opinion filed with DRA (RSA 33:11). • Treasurer enters details in register (RSA 33:12). • Treasurer submits report of borrowing to DRA (RSA 33:14). • Form 8038-G (or 8038-GC) filed with IRS. (“…to provide the IRS with the information required by section 149(e) and to monitor the requirements of sections 141 through 150.” - IRS)

  13. Funding Sources for Short-term Financing • Local banks – direct • Investment banking firms - indirect

  14. Happy Financing! • If you have questions, don’t hesitate to call me. • Sue Hunt • 603-326-1033 • (800) 442-6666

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