KNN Public Finance's experienced professionals are well-versed in the financial and regulatory complexities of funding Redevelopment Agency projects.
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COPs/Lease Revenue Bonds
Certificates of Participation (COPs) and lease revenue bonds are long-term financing instruments that are structured as leases and payable from General Funds. They do not require voter approval. Lease revenue bonds are similar and secured by lease payments on equipment and facilities. An asset's "useful life" and "essentiality" are key considerations for the security of a lease revenue bond.
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Variable Rate Securities
Variable rate debt has traditionally been used to obtain significant reduction of interest costs under appropriate conditions. Because there are extra costs of issuance with variable rate debt, variable rate debt saves issuers the most money when financings are large enough to reduce costs of issuance to a small percentage of the borrowing, typically about 2%, including underwriting (but not credit enhancement). In general, this means a minimum size in the $10 to $15 million range, and larger is better. Variable rate debt implies a certain amount of interest rate risk. But properly managed, variable rate debt has saved millions of dollars for issuers. In addition to advising several of our large and sophisticated clients on stand-alone variable rate debt, KNN opens the door to variable rate debt to smaller issuers like school districts by aggregating smaller individual school district loans into larger variable rate pool financings.
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Land Secured Finance
Also known by the colloquial term “Dirt Bonds,” land secured finance generally describes Mello-Roos and assessment bonds that are secured by a lien on property, often on unimproved property. Mello-Roos bonds are paid from a special tax; assessment bonds from assessments which are not true taxes. Both are secured by a pledge of the property. The security for payment of debt service may be in the form of, among other things, property taxes or special assessments based on the valuation of property, or sales proceeds received upon sales of parcels of property.
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Tax Increment Bonds
Tax increment bonds are issued by redevelopment agencies and are paid from the tax receipts generated by growth in valuation of the property in the redevelopment project area.
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Commercial Paper
A form of short-term funding used by large issuers, Commercial Paper is essentially short-term notes, usually backed by a line or letter of credit with a bank, issued by the institution. Commercial Paper is typically used to fund project payments on an as-needed basis, and eventually refunded with some form of permanent financing.
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Conduit Financing
Conduit financing is employed by entities without the authority to issue tax-exempt bonds independently. Conduit Bonds or Certificates of Participation are issued by a governmental unit to finance a project for use primarily by a (501 (c) (3)) non-profit corporation. The security for this type of issue is usually the credit of the conduit borrower or pledged revenues from the project financed and a lien on the financed property, not the credit of the governmental issuer.
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Credit Rating Management
As the most active financial advisor in the State, KNN has continual contact with the rating agencies, meeting with them in person or by phone at least once a week. Additionally, our firm has a unique asset in assisting public agencies and non-profits improve their credit ratings to obtain lower debt issuance costs. David Brodsly, one of our vice presidents, served as a senior credit officer for Moody’s Investor Services and his insider’s perspective on credit and disclosure issues has proven invaluable to our clients as they seek stronger credit ratings. As part of these services, KNN schedules all conference calls and meetings, assembles the credit package, and creates the rating presentation for our clients.
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Debt Capacity Analysis
A comprehensive analysis of debt capacity provides assurance that the amount of debt acquired by a municipality is cost effective. By analyzing debt capacity and establishing appropriate limits on debt issuance based on this analysis, KNN helps municipalities to keep their financial obligations at affordable levels.
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Educational Workshops
As an industry leader, KNN offers educational workshops to municipal finance officers, non-profit executives, school finance officials, and their respective Board and Council members. Our professional advisors demystify the funding process by explaining new products and regulations in clear, concise language. Workshop topics include, but are not limited to:
- A Debate on the Merits of Competitive and Negotiated Methods of Sale
- OPEB and Pension Obligations: To Bond or Not to Bond?
- Protecting Your Agency thorugh Debt and Swap Policies
- Land Secured Financings: Developing Local Goals and Policies
- How Much is Too Much? Debt Capacity and Debt Affordability Analysis
- The Debt Issuance Process: Briefings for County Board of Supervisors
- Establishing Prudent Debt Management Practices in Your Debt Program
- How Much Bonding Capacity Do We Have? Tax Rates, Assessed Values, and Bond Authorization Amounts
- Tobacco Securitization Bonds
- TRAN Process
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Financing Feasibility Analysis
KNN's access to real time market data through its parent company, Zion's Bank, provides our clients with a real advantage when evaluating the appropriate time to issue long-term debt. KNN helps public agencies and non-profits evaluate their current fiscal status and determine the feasibility of obtaining favorable interest rates in the current market.
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Investor Outreach
Because California's state and local finances are closely intertwined, institutional investors worry about the impact of California's budget crisis on the creditworthiness of cities, counties, and school districts. KNN facilitates meetings between public agencies and investors, proactively addressing concerns about the agencies' ability to mitigate adverse economic impacts and establish their creditworthiness in advance of issuing bonds.
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Variable Rate Oversight Program
KNN assists clients in evaluating the market's impact on variable rate debt and in determining next steps when interest rates begin to rise.
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Debt Management Policies
KNN explores today's most innovative financing tools for public agencies and non-profits. Then, our professionals work side by side with an agency's staff and elected representatives to develop practical and comprehensive debt management policies. These policies prepare an organization to manage future financial opportunities and challenges in the volatile marketplace.
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