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 rate.
Primary Market - The new issue market.
Principal - The face value of a bond, exclusive of
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
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 tax.
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
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
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
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
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
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.