New Search
Potential Use: These bonds may finance construction of any public utility facility which <br />generates future payments from its use, such as user fees, tolls, concession fees, and rental or <br />lease-back payments. <br />Advantages: Revenue bonds can be issued fairly rapidly, and debt can be specifically structured <br />to meet project needs. Level annual debt payments ensure that future as well as present users of <br />the new facilities will pay, thus enhancing equity. Revenue bonds have grown in popularity <br />because they are free from the requirements of GO bonds which must be approved by voters, are <br />subject to debt ceiling limitations, and may carry other restrictions covering principal and interest <br />repayments. <br />Limitations: Revenue bonds require debt service coverage, funding of a reserve, and other <br />covenants. <br />Applicability: This is the most appropriate financing tool for MWMC. With the exception of <br />"pay-as-you-go" financing, GO Bonds or subsidized state loans, revenue bonds generally offer <br />the lowest interest rate. If the project being funded is popular, the risk of a referendum is low. <br />Staff is also familiar and experienced with the administrative tasks common to revenue bonds. <br />_Revenue Obligations <br />Description: ORS 271.390 authorizes Oregon governmental units to enter into contracts for the <br />financing of real or personal property. These contracts may be called various names such as full <br />faith and credit obligations, certificates of participation, financing agreements, revenue <br />obligations, or other names that would describe the security provided. Given MWMC's <br />revenues, a likely name for financings under this statute would be Revenue Obligations. <br />Revenue Obligations may be secured by a wide range of revenues and pledges. They may be <br />secured solely by a mortgage on the property financed, or they can be secured by all revenues of <br />the issuer. The more security that is provided, the lower is the interest cost. The issuer may pay <br />the obligation out of all or any designated portion of the lawfully available revenues of the <br />issuer. <br />In Oregon, issuers may issue Revenue Obligations without voter approval. If the repayment of <br />the obligation is subject to annual appropriation, the obligation would not considered bonded <br />indebtedness. <br />Actual Use: Revenue Obligations are widely used in Oregon to finance personal and real <br />property. <br />Potential Use:. MWMC may issue Revenue Obligations via a bank placement, or if for some <br />reason it does not wish to issue revenue bonds under the Uniform Revenue Bond Act. <br />Advantages: Revenue Obligations do not require voter approval, They are also not subject to a <br />referendum. <br />Limitations: Some bond purchasers will not purchase "obligations," but only purchase "bonds". <br />Revenue Obligations will likely carry a slightly higher cost than straight revenue bonds, even <br />with the same level of security. Revenue Obligations that provide only a mortgage interest in the <br />asset financed will be more expensive than typical Revenue Bonds. Obligations that are secured <br />2005 MWMC Financial Plan - Appendix II Page 33 <br />