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:im^^DvisoR <br />Leaders in Public Finance Since 1955 Published Quarterly <br />I <br />JULY 1995 <br />The Bond Buyer Index (BBI) for 20 year <br />‘‘A** rMed bonds fell to S.7S% as of June <br />12, the lowest potne in I99S and down <br />significantiy from the 7.06% last <br />November 17. Tins is, of course, a nuxed <br />bag for those wuh arbitrage rebate <br />consiiferacions as the lower borrow mg rate <br />restricts Investment earnings which can <br />increase cash available for the project <br />itself. For the most pan, however, lower <br />boiTOwing rates are welcomed by <br />taxpayers and municipal ofTicials alike. <br />A proposal to remove the lax exemption <br />on municipal bonds for Stale income lax <br />in Minnesota did not make it through the <br />IW5 Legislative Session, but it created a <br />great deal of concern dunng its senous <br />consideration "Tax reform" propi>sals at <br />the federal level arc also creating great <br />interest and concern in the investment <br />community with their vary ing impacts on <br />lax exemption. Changes which affect the <br />tax advantage of municipal securities w ill <br />CONTENTS <br />BANS ........................................ I <br />Hopkins AMM Award ................2 <br />Scegar Swanson. Jr <br />Ketircmeni Comments ..........2 <br />Conferenccs/Conveniions ..........3 <br />Summary' of Area Bond Sales . 4 <br />Quotable Quotes <br />"Oftentimes, politKaJ enuues with <br />limited deN issuance cxpenence <br />are tmk^n to the cleaners. Such <br />entities are kss to pay, and <br />they frequently take negotiated <br />proposals at face value without <br />chalknge Funds which could be <br />used for necessary public purposes <br />are diverted to unnecessary fees <br />and expenses." <br />Taken from /2A>.f issue of <br />Government Finance Review <br />also affect their pricing and demand. <br />SLCONDARY MARKET DIS- <br />CLOSl RE lb HERE Effective July 3, <br />1995. it becomes (I) unlaw ful fix a bn>kcr <br />or dealer to purchase or sell municipal <br />secuniics in connection with a primary <br />offering of an issue of municipal <br />securities with an aggregate pnncipal <br />amount of at least SI .OOO.tXM), unless it <br />has reasonably determined that the issuer <br />Of an "obligated person" has undertaken <br />in a wnilen agreement to provide certain <br />information annually and upon the <br />occurrence of material events; and (2) <br />unlawful for a dealer to recommend the <br />purchase or sale of municipal securities <br />unless he/she has prixedurcs in niace that <br />prt>vide rcavmable assurance that prompt <br />n4>ii:c of the iKCurrence of a material <br />event will he received promptly pursuant <br />to the continuing disclosure undertaking. <br />Ilicre are additional rules, procedures and <br />exempUions which wc will he happy to <br />discuss if you give us a call Most <br />impHirtanlly. if you plan to borrow money <br />tax exempt after July 3, 1995, you MUST <br />comply with the new rtgulalions. We <br />Will be happy to assist you in determining <br />the level of continuing disclosure you are <br />required to provide <br />-BANS": CONVENTIONAL <br />WISDOM vt. THE MARKET­ <br />PLACE <br />By: Tkivt Wmgner, BrookfieU Offke <br />"Conventional Wisdom" has ling held <br />that certain municipval obligaiHms couki or <br />should only he sold by negotiaucHi w ith an <br />underwriter, a process sometimes termed <br />a "private sale" in contrast with a <br />compictitivc "pniblic sak". Examples of <br />such obligations that have at one lime or <br />another been held to fall into this category <br />include small and/ix non-rated general <br />obiigatiims. waier/sewer/clecinc system <br />revenue Nmds. spvecial assessment bonds <br />and N>nd aniicipvation mHcs ("BANs"). <br />B ANs were held to be the most unsuitable <br />fur public sale Hie logic w'as that the <br />w cak demand for these securities required <br />longer lead lime by underwriters to first <br />locate and then educate piotential buyers <br />of such securities The term "story bonds" <br />is son>ciimes applied to such secunties. <br />Over the years the compeiiiivc <br />marketplace has increasingly shown a <br />demand for "story' bond" secunties with <br />good financials issued by municipalities <br />for essential pHiiposcs back^ by either an <br />unlimited lax kvy or by demonstrated net <br />revenues of a municipal cnlerpxise. We <br />have seen small general obligation issues <br />and revenue bonds attract 10 or more bids <br />from commercial banks and underwriters <br />outside of the Milwaukee market. <br />Recently, however, we have witnessed <br />a demand for BA.Ns which defies <br />conventional wisdom. Examples of 4 <br />EHLERS AND ASSOCIATES, INC. <br />2950 Norwest Center • 90 South Seventh Street • Minneapolis, MN 55402-4100 • 612-339-8291 • FAX 612-339-0854 <br />Corporate Woods. Suite 225 • 375 Bishops Wav • Brookfield. Wl 53005-6200 • (414) 785-1520 • FAX (414) 785-1810