NHA Advisors has utilized a variety of financing mechanisms to meet the funding requirements of our public agency clients. When developing a financing plan, our approach begins with a thorough investigation of the public agency’s needs. This needs analysis allows NHA Advisors to evaluate all available financing options before proposing a solution that best meets the public agency’s fiscal and policy objectives.
Our expertise includes:
General Obligation Bonds (Ad Valorem Tax)
General obligation bonds (“G.O. bonds”) are the oldest and most secure form of bonds. They are secured by a property tax that can be adjusted (without limit) to meet the revenue needs (debt service) of any authorized bond. NHA Advisors has worked with many cities, special districts, and school districts to develop successful voter-approved G.O. bond programs to fund major capital projects, including: schools, libraries, parks, sports facilities, open space, community centers, and public safety buildings.
Revenue Bonds (Utilities, Parking)
Revenue bonds are secured solely by a dedicated revenue source. They are typically used for utilities (water, sewer, and electric), parking, or other reliable revenue generating operations. NHA Advisors has structured revenue bond transactions for theme parks; municipal utilities such as electric, water, and sewer; parking operations; and transportation.
Assessment Bonds (Limited Obligation Improvement Bond)
Dating back to 1911, assessment bonds are one of the oldest dedicated tax mechanisms. An assessment is a lien against real property that is limited by the amount agreed to by the property owner(s). The lien allows for an annual property tax levy which serves as the revenue pledge for a limited obligation improvement bond which is typically used to fund public improvements that are local to the encumbered property. The assessment lien is based on the benefit received from the bond-funded project and is typically a fixed annual amount. NHA Advisors has extensive experience using assessment bonds to fund public infrastructure (curbs, gutters, storm drains, utilities, recreation facilities, and landscape improvements).
Special Tax Bonds (Community Facilities District)
Similar to an assessment, a special tax is a dedicated tax that is generally used to make debt service payments on bonds that fund the purchase, construction, expansion, improvement, or rehabilitation of public facilities or public services. Community facility districts are generally more flexible than assessment districts because they allow the allocation of a special tax without regard to benefit. As a result, the majority of public infrastructure projects are funded issuing special tax bonds rather than assessment bonds. NHA Advisors is an expert in the area of special tax structures and has developed financing programs for both public facilities (streets, water and sewer systems, storm drainage, schools, libraries, recreation facilities, parks, landscaping, etc.) and services (police and fire protection, ambulance services, park maintenance, flood protection, environmental cleanup, etc.).
Capital Leases (Certificates of Participation)
A capital lease is a financing structure that allows a public agency to generate proceeds for capital projects without voter approval. Capital lease structures are similar to traditional equipment leases where an asset is pledged and the lease payments represent the use and possession of the asset. For public leases in California, a lender only has the ability to re-lease an asset in the event the public agency does not make payments. There is no ability to foreclose or liquidate the asset through a sale. The principals of NHA Advisors were involved in the first certificates of participation financing in 1984 and have been on the leading edge of lease structures for projects ranging from streets to building acquisition and improvements.
Pension Obligation Bonds (Side Fund Refunding)
Pension obligation bonds (“POBs”) are typically issued to fund all or a portion of a public agency pension plan’s unfunded actuarial liability. Although POBs are generally taxable, local agencies can often borrow at interest rates lower than the imputed cost of funds built into pension programs. POBs are also used to manage the future cash flow requirements of a public agency. NHA Advisors has worked with many public agencies to develop POB programs for side-funds, traditional CalPERS participants, and 57 Act programs.
Notes (TRANs, BANs, GANs, RANs)
Notes typically have a maturity of less than two years and are generally used as short-term financing or as a bridge funding source that will ultimately have some other long-term financing (taxes, revenues, or bond proceeds). Public agencies can also use notes to fund operations when monthly expenses do not match up with revenues. The issuance of a tax and revenue anticipation note (“TRAN”) is common practice and requires a public agency to have sufficient revenues in any fiscal year to cover expenses (repayment cannot be deferred into the next fiscal year). NHA Advisors has a long history of assisting public agencies with the issuance of short-term notes, including: TRANs, bond anticipation notes (“BANs”), grant anticipation notes (“GANs”), revenue anticipation notes (“RANs”), and other short-term notes.
Tax Increment Financing (Tax Allocation Bonds)
Traditionally used to fund redevelopment activity for cities, tax allocation bonds (“TABs”) are secured by future property tax revenues that are generated by improvements to properties which increase assessed value. Under redevelopment laws, the majority of incremental tax revenues can be captured by redevelopment agencies and pledged towards tax allocation bonds. NHA Advisors has a long history of working with both small and large redevelopment agencies to develop financing plans for redevelopment project areas throughout California. Given the demise of redevelopment in California, NHA Advisors is working closely with the California Redevelopment Association Technical Advisory Committee to develop workout strategies for agencies most impacted by the termination of redevelopment powers.