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solely by a mortgage interest in the assets financed may only be used for financing buses, <br />buildings, or other capital projects where a real asset exists that is suitable as collateral. <br />Applicability: Under most circumstances, it would be more advisable for MWMC to issue <br />Revenue Bonds rather than Revenue Obligations. <br />Short-term Municipal Notes <br />Description: Short-term Municipal Notes are generally considered "bridge fmancing" providing <br />short-term cash until a larger source of committed funds is received. They are often known by <br />their acronyms, such as Bond Anticipation Notes (BANs), Grant Anticipation Notes (GANs) and <br />Tax Anticipation Notes (TANS.) These instruments generally have maturities ranging from a <br />few months to a few years, may have fixed or variable interest rates, and are issued in <br />anticipation of a bond issue, grant proceeds, or tax collections. <br />Actual Use: State and local governments issue billions of dollars a year in "short-term <br />municipals" of all types, to meet immediate capital needs for design and initial construction <br />while waiting for long-term funding revenues. These short-term instruments are issued to fund <br />many different activities. Examples include housing and urban renewal, water and wastewater <br />project startups, transportation projects, school district operations, and temporary agency <br />operating deficits caused by seasonal variations in tax collections. <br />Potential Use: Short-term municipals can be used to meet short-term gaps in project finance and <br />operations when they occur, and until the final sources of funds become available. <br />Advantages: Short-term municipal bonds provide issuers with immediate funds for capital and <br />operating needs. <br />Limitations: Short-term municipals generally require atake-out financing which results in <br />higher financing costs and funding is temporary. <br />Applicability: Short term bonds could be an appropriate tool for MWMC under certain <br />circumstances, however internal borrowing would generally be a preferable method for short- <br />term financing. <br />_Direct Source (Equipment) Financing Loans <br />Description: With direct source financing, the borrower receives equipment financing directly <br />from the equipment vendor. This approach tends to streamline the borrowing process, <br />simplifying documentation and minimising intermediary involvement. In particular, it is not <br />subject to the municipal securities disclosure requirements of Securities and Exchange <br />Commission (SEC) Rule 15c2-12. Certain large equipment vendors have public finance arms <br />which work with tax-exempt borrowers to design financing programs to meet specific equipment <br />needs at tax-exempt interest rates, with flexible payment terms. <br />Actual Use: Equipment purchases are often accomplished with direct source financing (also <br />sometimes called equipment financing). However, leasing has proven to be a very competitive <br />alternative fmancing technique. The financed equipment is often the collateral for the loan. <br />Potential Use: Direct source financing could be used to acquire equipment needed for system <br />operations. <br />2005 MWMC Financial Plan - Appendix II Page 34 <br />