|Par Value -
The face value or principal amount of a bond, usually $5,000
due the holder at maturity. It has no relation to the market
value. For pricing purposes it is considered 100.
Parity Bonds - Revenue bonds that
have an equal lien on the revenues of the issuer.
Paying Agent - Generally a bank
that performs the function of paying interest and principal
for the issuing body.
Premium - The amount, if any,
by which the price exceeds the principal amount (par value)
of a bond. Its current yield will be less than its coupon
Primary Market - The new issue
Principal - The face value of
a bond, exclusive of interest.
Proposition 13 - (Article XIIIA
of the California Constitution) Passed in 1978, this proposition
enacted sweeping changes to the California property tax system.
Under Prop. 13, property taxes cannot exceed 1% of the value
of the property and assessed valuations cannot increase by
more than 2% per year. Property is subject to reassessment
when there is a transfer of ownership or improvements are
made. See our Proposition 13 Fact Sheet for more information.
Proposition 218 - (Article XIIID
of the California Constitution) This proposition, named "The
Right to Vote on Taxes Act", filled some of the perceived
loopholes of Proposition 13. Under Proposition 218, assessments
may only increase with a two-thirds majority vote of the qualified
voters within the District. In addition to the two-thirds
voter approval requirement, Proposition 218 states that effective
July 1, 1997, any assessments levied may not be more than
the costs necessary to provide the service, proceeds may not
be used for any other purpose other than providing the services
intended, and assessments may only be levied for services
that are immediately available to property owners.
Qualified Legal Opinion - Conditional
affirmation of the legal basis for the bond or note issue.
The average investor should avoid any but the strongest opinion
by the most recognized bond approving attorneys.
Rate and Method of Apportionment (RMA)
This is a feature of a Mello-Roos Community Facilities
District. The RMA document describes the formula for determining
the annual charge an individual property receives. Typically,
the RMA categorizes property by land use type, building square
footage, acreage, etc. Each of these categories is then assigned
a maximum special tax rate. The actual amount of special tax
levied against any one property is determined by the apportionment
methodology in the RMA and cannot exceed the maximum special
Ratings - Various alphabetical
and numerical designations used by institutional investors,
Wall Street underwriters, and commercial rating companies
to give relative indications of bond and note creditworthiness.
Standard & Poor's and Fitch Investors Service Inc. use
the same system, starting with their highest rating of AAA,
AA, A, BBB, BB, B, CCC, CC, C, and D for default. Moody's
Investors Services uses Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C,
and D . Each of the services use + or - or +1 to indicate
half steps in between. The top four grades are considered
Investment Grade Ratings.
Red Herring - A preliminary offering
statement, subject to final change and update upon completion
of sale of bonds.
Redemption - Process of retiring
existing bonds prior to maturity from excess earnings or proceeds
of refunding bonds. It also refers to redeeming shares in
a mutual fund by selling the shares back to the sponsor.
Redevelopment Agency (Redev.)
- A legislatively established subdivision of government established
to revitalize blighted and economically depressed areas of
a community and to promote economic growth. Tax Allocation
Bonds are issued to pay the cost of land and building acquisition
and their redevelopment and are repaid by the incremental
increase in tax revenues produced by the increase assessed
value of the area after redevelopment. Redev. Agencies may
also sell Housing Mortgage Revenue Bonds to finance housing
units within the area, a fixed percentage of which must be
for low-cost housing.
Refunding Bond - The issuance
of a new bond, usually at a lower interest rate, for the purpose
of retiring an already outstanding bond issue. Usually done
to save interest costs, just as a property owner will attempt
to refinance a mortgage when interest rate drop.
Registered Bond - A non-negotiable
instrument in the name of the holder either registered as
to principal or as to principal and interest.
Revenue Bond - A municipal bond
whose debt service is payable solely from the revenues derived
from operating the facilities acquired or constructed with
the proceeds of the bonds.
Secured Property - Property on
which the property taxes are a lien against real estate.
Special Assessment - A charge
imposed against property in a particular locality because
that property receives a special benefit by virtue of some
public improvement, separate and apart from the general benefit
accruing to the public at large. Special assessments must
be apportioned according to the value of the benefit received,
rather than the cost of the improvement, and may not exceed
the value of such benefit or the cost of the improvement,
whichever is less.
Self Supporting Bonds - Bonds
payable from the earnings of a municipal utility enterprise.
Serial Bond - A bond of an issue
that features maturities every year, annually or semi-annually
over a period of years, as opposed to a Term Bond, which is
a large block of bonds maturing in a single year.
Sinking Fund - Money set aside
on a periodic basis to retire term bonds at or prior to maturity.
Sinking Fund Schedule - A schedule
of payments required under the original bond resolutions to
be placed each year into a special fund, called the sinking
fund, and to be used for retiring a specified portion of a
term bond issue prior to maturity.
Special Assessment Bond - A bond
secured by a levy of special assessments, as opposed to property
taxes, made by a local unit of government on certain properties
to defray the cost of local improvements and/or services that
represents the specific benefit to the property owner derived
from the improvement. In California these are usually 1915
Act or 1911 Act Bonds.
Special Districts - Single-purpose
or limited-purpose units of government formed under state
enabling legislation to meet certain local needs not satisfied
by existing general purpose governments in a given geographical
area. In some states, special districts (such as school districts)
may be granted taxing powers.
Supplemental Tax - An adjustment
in real property valuation resulting from upward changes in
assessed value due to changes in ownership or completion of
new construction. A secured property supplemental tax bill
retroactively taxes the supplemental assessment of a property
on a pro-rata basis as a result of the assessor's reappraisal
of property at its full cash value on the date that a change
in ownership occurs or new construction is completed.