§ 100407 Bond Proceeds Allocation Rules

This law says that when bonds are sold, any interest and extra fees that have built up must go into a special fund to pay back the bond money, and the rest of the money goes into a separate fund for the project the bonds were meant to fund.

Key Takeaways

•Interest and premiums from bond sales must go to a fund that pays back the bonds.
•All other money from the bond sale goes to a fund that can only be used for the project the bonds were meant to fund.
•After the project is done, any leftover money can be moved back to the payment fund or used to buy back and cancel bonds.

Example

A transit agency sells $50 million of bonds to build a new light‑rail line. The bonds have $1 million of accrued interest and $0.5 million of premium fees.

The $1.5 million (interest + premium) is put into the payment fund to help pay back the bonds later. The remaining $48.5 million goes into the improvement fund to be used only for building the light‑rail line. After the line is finished, any leftover money can be moved back to the payment fund or used to buy back and cancel some of the bonds.

How to Calculate

Payment Fund = Accrued Interest + Premiums Improvement Fund = Total Proceeds – (Accrued Interest + Premiums)

Find the total amount of money received from selling the bonds.
Add together any interest that has built up and any premium fees.
Put that sum into the Payment Fund.
Subtract the sum from Step 2 from the total proceeds. The remainder goes into the Improvement Fund.

Bond sale of $100 million with $2 million accrued interest and $1 million premium.

Result: Payment Fund = 2,000,000 + 1,000,000 = 3,000,000 Improvement Fund = 100,000,000 – 3,000,000 = 97,000,000

All accrued interest and premiums received on the sale of bonds shall be placed in the fund to be used for the payment of principal of and interest on the bonds and the remainder of the proceeds of the bonds shall be placed in the treasury to the credit of the proper improvement fund and applied exclusively to the purposes for which the debt was incurred, which purposes shall be in conformity with an approved general transit plan or element thereof then in effect. When those purposes have been accomplished any moneys remaining in the improvement fund (a) shall be transferred to the fund to be used for the payment of principal of and interest on the bonds, or (b) shall be placed in a fund to be used for the purchase of outstanding bonds of the VTA from time to time in the open market at prices and in a manner, either at public or private sale or otherwise, as the board may determine. Bonds so purchased shall be canceled immediately. (Amended by Stats. 2016, Ch. 381, Sec. 89. (AB 2196) Effective January 1, 2017.)

Key Takeaways

•Interest and premiums from bond sales must go to a fund that pays back the bonds.
•All other money from the bond sale goes to a fund that can only be used for the project the bonds were meant to fund.
•After the project is done, any leftover money can be moved back to the payment fund or used to buy back and cancel bonds.

Example

A transit agency sells $50 million of bonds to build a new light‑rail line. The bonds have $1 million of accrued interest and $0.5 million of premium fees.

How to Calculate

Payment Fund = Accrued Interest + Premiums Improvement Fund = Total Proceeds – (Accrued Interest + Premiums)

Find the total amount of money received from selling the bonds.
Add together any interest that has built up and any premium fees.
Put that sum into the Payment Fund.
Subtract the sum from Step 2 from the total proceeds. The remainder goes into the Improvement Fund.

Bond sale of $100 million with $2 million accrued interest and $1 million premium.

Result: Payment Fund = 2,000,000 + 1,000,000 = 3,000,000 Improvement Fund = 100,000,000 – 3,000,000 = 97,000,000

Key Takeaways

Example

How to Calculate

Key Terms

References

§ 100407 Bond Proceeds Allocation Rules

Key Takeaways

Example

How to Calculate

Key Terms

References

Key Takeaways

Example

How to Calculate

Key Terms

Related Statutes

References

Key Takeaways

Example

How to Calculate

Key Terms

Related Statutes

References