If we use the ABAG pool, are we in any way liable for the payments or defaults of other pool participants?
- Absolutely not. Each borrower has a separate, stand-alone installment purchase contract with ABAG. If one participant were to default, there would be no effect on the other participants or the AAA rating of the pool. There is no cross collateralization of payments or reserve funds.
Do we need to get voter approval to borrow through the ABAG pool?
- No. Generally, the borrowing can be authorized by a resolution of the participant's governing body.
How long can a loan be amortized?
- Borrowing terms up to 30 years are typical. However, as with all tax-exempt financing, the term of
the debt should not be longer than the estimated useful life of the facilities or equipment being
financed.
What is the security for the bonds?
- The Bonds are revenue bonds secured by a pledge of enterprise revenues. Specifically,
they are secured by each participant's pledge to maintain net revenues (revenues less operating
and maintenance costs) of at least 1.2 times annual debt service, over the
term of the Bonds. This is a standard method of securing enterprise revenue bonds.
What can be financed through the pool?
- Capital improvements to water and wastewater systems and any refinancing of existing
revenue-supported debt.
How long do we have to spend the bond proceeds?
- Participants will be advised as to IRS regulations regarding spending the bond proceeds. Generally, you must expect to spend bond proceeds within three years.
What was the interest rate on the last ABAG water and wastewater pool issue?
- The Series 1998A issue had a net interest cost (NIC) of 5.11 percent over 23 years.
(Future interest rates are subject to market conditions at the time of sale.)
If you have additional questions, contact Clarke Howatt, the ABAG Financial Services Manager.
