Tax-backed debt obligations, Financial Management

Assignment Help:

Tax-backed debt obligations are the debt instruments issued by counties, states, cities, towns, special districts and school districts. These are secured by some form of tax revenue and are classified into three types. They are as follows:

  1. General Obligation Debt: General Obligation Debt is a municipal security secured by the taxing and borrowing power of the municipality issuing it. In fact, they are backed by the credit and taxing power of the issuing jurisdiction rather than the revenue it receives from a given project in hand. This is the feature, which influences the investor to invest in these securities.

In addition to above back up, certain identified fees, grants and special charges also secure some of the general obligation securities. These are the amounts, which provide additional revenue to the State outside the purview of the general fund. Due to this dual nature of the revenue sources, these securities are also known as double-barreled in security.

  1. Appropriation-Backed Obligations: Appropriation-Backed Obligations are securities issued by agencies or authorities of several States to meet their entity obligations. These securities are backed up with the appropriation of funds from the State general tax revenue. The state legislature should approve this appropriation of funds from the state's general tax revenue. However, the state's obligation is not binding. When a debt obligation is backed by such non-binding pledge of tax revenue, it is known as moral obligation bonds. The moral obligation pledge helps in enhancing the creditworthiness of the issuer. Lease-backed debt is another type of appropriation-backed obligation.

  2.  Debt Obligations Supported by Public Credit Enhancement Programs: A moral obligation is a form of credit enhancement provided by the state. This obligation of the state is neither legally enforceable nor legally binding. However, the public credit enhancements can be made legally enforceable if the state or a federal agency guarantees the issue or when there is an obligation to automatically withhold and deploy state aid to pay any defaulted debt service by the issuing entity.


Related Discussions:- Tax-backed debt obligations

Determine the post-merger eps and post-mergershare price, Post-merger EPS a...

Post-merger EPS and post-mergershare price An estimated post-merger EPS can be calculated by: (Combined earnings) / total shares after merger An estimated post-merger s

Deficiency in operation, Deficiency in Operation - This exists when a prope...

Deficiency in Operation - This exists when a properly designed control doesn't operate as designed or when person performing the control doesn't possess the necessary authority or

Liquidity mix, I am facing some problems in my assignment of Liquidity Mix....

I am facing some problems in my assignment of Liquidity Mix. Can anybody suggest me the proper explanation for it?

Accounting framework - convention of disclosure, Accounting Framework - Con...

Accounting Framework - Convention of Disclosure The doctrine of disclosure suggested in which all accounting statements should be honest and to that end, full disclosure of al

Credit limit decision-bajaj electronics company case study , how would you ...

how would you judge the potential profit of bajaj electronics on the first year of sales to booth plastics and give your suggestion regarding credit limit.Should it be approved or

Explain the benefits of benchmarking, Explain the Benefits of benchmarking ...

Explain the Benefits of benchmarking - Better understanding of business, competition and customers. - Improves business performance and discourages complacency. - Good wa

Project-managing the budget process, Do a Gantts Chart, project-managing th...

Do a Gantts Chart, project-managing the Budget process. This task should contain a well designed chart with tables and discussion. Budgeting thus is identified as a project to be m

Bank credit, Definition of 'Bank Credit': The amount of credit availab...

Definition of 'Bank Credit': The amount of credit available to a business or individual from the banking system. It is the aggregate of the amount of funds financial instituti

Determine the working capital in the firm, a) Year 2 Current Ratio = 700 / ...

a) Year 2 Current Ratio = 700 / 300 = 2.33 : 1 Year 1 Current Ratio = 500 / 200 = 2.5 : 1 Year 2 Acid Test = (700 - 350) / 300 = 1.17 : 1 Year 1 Acid Test = (500 - 250) / 200 =

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd