Taxable debt shall be issued by the Township when more attractive
long-term financing opportunities are not available. The Township
may issue taxable debt in accordance with all federal and Commonwealth
of Pennsylvania borrowing statutes and regulations. For example, the
Township may issue taxable debt to avoid burdensome arbitrage regulations.
As used in this article, the following terms shall have the
meanings indicated:
ARBITRAGE
The gain that may be obtained by borrowing funds at a lower
(often tax-exempt) rate and investing the proceeds at higher (often
taxable) rates. The ability to earn arbitrage by issuing tax-exempt
securities has been severely curtailed by the Tax Reform Act of 1986, as amended.
BOND
A security that represents an obligation to pay a specified
amount of money on a specific date in the future, typically with periodic
interest payments.
BOND COUNSEL
An attorney (or firm of attorneys) retained by the Township
to give a legal opinion concerning the validity of the securities.
The bond counsel's opinion usually addresses the subject of tax
exemption. Bond counsel may prepare, or review and advise, the issuer
regarding authorizing resolutions or ordinances, trust indentures,
official statements, validations proceedings and litigation.
COMMERCIAL PAPER
Short-term unsecured promissory notes issued in either registered
or bearer form and usually backed by a line of credit with a bank.
Maturities do not exceed 270 days and generally average 30 days to
45 days.
COMPETITIVE SALE
The sale of securities in which the securities are awarded
to the bidder who offers to purchase the issue at the best price or
lowest cost.
CONDUIT DEBT
Conduit debt obligations are certain limited-obligation revenue
bonds, certificates of participation, or similar debt instruments
issued by a state or local governmental entity for the express purpose
of providing capital financing for a specific third party that is
not a part of the issuer's financial reporting entity.
COUPON RATE
The annual rate of interest payable on a security expressed
as a percentage of the principal amount.
CREDIT RISK
The risk to an investor that an issuer will default in the
payment of interest and/or principal on a security.
CURRENT REFUNDING
Refunding bonds issued less than 90 days before the call
date of the bonds being refunded.
CURRENT YIELD
The annual income from an investment divided by the current
market value. Since the mathematical calculation relies on the current
market value rather than the investor's cost, current yield is
unrelated to the actual return the investor will earn if the security
is held to maturity.
DEBT LIMITATION
The maximum amount of debt that is legally permitted by a
jurisdiction's charter, constitution, or statutes.
DEBT SERVICE
The amount necessary to pay principal and interest requirements
on outstanding bonds for a given year or series of years.
DISCOUNT
The amount by which the par value of a security exceeds the
price paid for the security.
FAIR VALUE
The amount at which an investment could be exchanged in a
current transaction between willing parties, other than in a forced
or liquidation sale.
FINANCIAL ADVISOR
A consultant who advises an issuer on matters pertinent to
a debt issue, such as structure, sizing, timing, marketing, pricing,
terms, and bond ratings.
FORWARD REFUNDING
A refunding in which the bonds are sold with the intent to
close or deliver at some future point in time, generally more than
30 days after pricing, and often to coincide with a date 90 days prior
to the call date on the refunded bonds, thereby qualifying as a current
refunding.
FUND BALANCE
The excess of a fund's assets over its liabilities.
For accounting purposes, fund balance is identified as nonspendable,
restricted, committed, assigned or unassigned. See also: "working
capital."
GENERAL FUND
A governmental fund used to account for all financial resources
not required to be accounted for elsewhere by legal, contractual or
administrative requirement. The general fund is the main operating
fund of the Township.
INTEREST RATE RISK
The risk associated with changes in general interest rate
levels or yield curves.
ISSUE
All bonds authorized to be sold in respect of a particular
project, whether authorized to be sold at one time or from time to
time in one or more series.
LIQUIDITY RISK
The risk that a given security or asset cannot be traded
quickly enough in the market to prevent a loss (or make the required
profit).
LOCAL GOVERNMENT UNIT DEBT ACT (THE DEBT ACT)
Administered by the Pennsylvania Department of Community
and Economic Development (DCED); provides the procedure for Pennsylvania's
local government units to issue debt and tax anticipation notes. The
Act also provides the borrowing limits for the local government units.
MARKET VALUE
The price at which a security is trading and could presumably
be purchased or sold.
NET PRESENT VALUE SAVINGS
A method of calculating the aggregate amount of savings on
a refunding transaction taking into consideration the time value of
money and net of all issuance fees.
NONELECTORAL DEBT
All debt determined, incurred or authorized to be incurred,
except electoral debt and lease rental debt.
OVERALL NET DEBT PER CAPITA
This number generally includes underlying and overlapping
debt and indicates how heavy the debt burden is for residents.
OVERALL NET DEBT PERCENT OF MARKET VALUE
Overall net debt to market value; a ratio of the dollar value
of debt to the value of the underlying tax base. This number provides
insight into how heavy or light the debt burden is on taxable property.
PRESENT VALUE SAVINGS
In each semiannual period, the present value of the debt
refunded bonds using the arbitrage yield on the refunding bonds as
the discount rate.
PROJECTS, AS DEFINED IN THE DEBT ACT (WITH EXCLUSIONS)
Includes any of the following:
A.
Items of construction, acquisition, extraordinary maintenance
or repair which have been undertaken by a local government unit.
B.
Preliminary studies, surveying, planning, testing or design work for any undertaking described in Subsection
A of this definition.
C.
Land or rights in land to be acquired.
D.
Furnishings, machinery, apparatus or equipment normally classified
as capital items, but these items must have a useful life of five
years or more if financed separately and not as part of a construction
or acquisition project.
E.
The local government unit's share of the cost of a project
undertaken jointly with one or more other local government units or
the commonwealth or one of its agencies.
F.
Funding or refunding of debt incurred for any or all of the
foregoing purposes.
G.
Any combination of any or all of the foregoing as any or all
of the above may be designated as a project by the governing body
for the financing of which it desires to incur debt.
H.
Any deficit to be funded by bonds or notes as provided in this
article or the creation of a revolving fund for specific improvements.
I.
Where a local government unit has adopted a capital budget,
any unfunded portion of the capital budget selected by ordinance for
current funding.
SERIES
All the bonds or notes to be sold and delivered at one time
in respect of one project or of any two or more projects which have
been combined for purposes of financing or where the bonds or notes
have been combined for sale as provided in this article.
TAXABLE ADVANCE REFUNDING BONDS
Taxable bonds issued to refinance an outstanding bond issue
before the date the outstanding bonds become due. Proceeds of the
taxable advance refunding bonds are deposited in escrow with a fiduciary,
invested in U.S. Treasury bonds or other authorized securities and
used to redeem the underlying bonds at their maturity or call date,
to pay interest on the bonds being refunded, or to pay interest on
the advance refunding bonds.
TOTAL DIRECT DEBT
The total amount of debt the issuer is directly responsible
for repaying. It excludes overlapping and underlying debt.
UNDERWRITER
A party that guarantees the proceeds to the firm from a security
sale, thereby, in effect, taking ownership of the securities. Or,
stated differently, a firm, usually an investment bank, that buys
an issue of securities from a company and resells it to investors.
WORKING CAPITAL
The amount of current assets that is in excess of current
liabilities. Working capital is frequently used to measure a firm's
ability to meet current obligations. A high level of working capital
indicates significant liquidity.
YIELD CURVE
The relation between the interest rate (or cost of borrowing)
and the time to maturity of the debt.