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CEDAR RIDGE PARTNERS |
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Municipal Bonds
Generally, municipal bonds are issued as general obligations of a state or local government which are secured by the issuer’s taxing power, or as revenue bonds which are secured by user fees and other revenues pledged to pay debt service on such bonds. The major portion of municipal bonds are issued to fund public projects, including economic development, education, electric power, healthcare, housing, transportation, water and sewer, and pollution control. Interest payments on most municipal bonds are typically federally tax-exempt (and payments may also be exempt from state taxation). In addition, U.S. Federal tax law has enabled governmental issuers to issue billions of dollars of tax-exempt municipal bonds on behalf of certain corporate entities for various qualified purposes. Corporate-backed municipal bonds are typically issued as limited obligations of a governmental issuer payable from revenues derived pursuant to a loan, lease, installment sale or financing agreement with a corporate entity (including, but not limited to, such entities as airlines, electric utilities, healthcare facilities and industrials). Such bonds are typically treated as a long term debt on parity with senior unsecured bonds issued by such corporate entity, except that interest payable on corporate-backed municipal bonds is federally tax-exempt. |
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