FAQ

Step 1 - Learn about the bonds

Read the Preliminary Official Statement (POS) available from this web site or from the participating brokers to learn more about the bonds, including their security, maturity dates, credit ratings, the types of projects they finance and other information that you may find important to help you make an informed investment decision. This website is not an offer to sell any bonds.

Step 2 - Open a brokerage account

You must have an account with one of the brokerage firms participating in the bond sale, or with another firm that can place an order through a brokerage firm participating in the bond sale. Please check to determine if your broker can place an order through the participating brokers. (If you have a brokerage account, go to Step 3.) If you do not have an account, you may open one and purchase bonds during the Retail Sale Order Period. A list of brokers participating in the sale can be found on the left side of this page.

Investors are encouraged to begin the New Account process well in advance of the sale date. Depending on the brokerage firm, internal new account procedures may take some time to process.

Step 3 - Place your order

Contact the broker with whom you have an account, either online or by phone, to get more information about how to buy bonds during the Retail Sales period. Discuss with the broker the number of bonds, the maturity date and the price at which you are willing to purchase the bonds, as well as any questions you may have from examining the Preliminary Official Statement (POS).

Interest Rate - The interest rate is a percentage of the principal (the amount borrowed), payable for the use of the borrowed money.  Interest on bonds with fixed interest rates typically is compounded and paid semiannually.  Interest on bonds with variable interest rates is payable at a rate that changes periodically based on specified criteria and is typically paid monthly.

Price - The price is the amount investors are willing to pay based on certain variables, including current market yields, supply and demand, credit quality, maturity, and tax status.  Keep in mind that prices and yields move in opposite directions.  When market yields increase, the value of a bond decreases, and vice versa.

Yield - The yield generally refers to the return an investor earns on the bond, taking into account the price the investor paid for the bond, which may differ from the face value or par amount of the bond.  The yield is calculated in two ways: based on the market price and interest rate; or by taking into account a number of other factors, including maturity date, optional redemption date(s), and the time between interest payments.  Investors should consult their brokers or other financial advisors to learn more about yield and the different ways to measure it.

Maturity - Maturity is the date when the principal on the bond is scheduled to be repaid to the investor.  The City generally sells bonds that have maturities between 1 and 30 years.  In general, the further out the maturity date, the higher the  yield on the bond.

Redemption Provisions - Some bonds contain provisions that allow the City to redeem, or “call,” all or a portion of the bonds, at specific prices, prior to their maturity dates.  Bonds frequently are called when interest rates are lower than when the City originally sold the bonds.  Bonds with certain redemption provisions usually offer investors higher yields to compensate for the risk that the bonds might be called early.  When the City calls a bond, it pays the holder the principal amount and any interest earned since the last interest payment.  However, the holder does not typically receive the interest that would have been earned if the bond had been allowed to reach its maturity date.  Holders of bonds that have been called for redemption are notified of upcoming payment. 

Creditworthiness - Most municipal bonds are rated by one or more of the three major rating agencies:  Fitch Ratings, Moody’s Investors Service, and S & P Global Ratings.  A credit rating is an independent assessment of the creditworthiness of the bonds. An explanation of the significance and status of credit ratings may be obtained from the rating agencies furnishing such rating.

Credit Risk - Risk that the issuer is unable to pay scheduled principal and interest on a timely basis.  To evaluate the credit quality of an issuer, examine its credit ratings and review the Preliminary Official Statement of the offering, which contains detailed financial information of the issuer.

Interest Rate Risk - When interest rates decrease, bond and note prices increase, and when interest rates increase, bond and note prices decrease.  Interest rate risk is the risk that changes in interest rates may reduce (or increase) the market price of a security.  For investors who own a bond or note until its maturity, interest rate risk is not a concern.

New bond issues are sold in the primary market.  In a new issue, all of the terms are set, including the initial price and interest rates, and the bonds are sold to investors, with the issuer receiving the proceeds. Primary market issues are affected through one of two methods:

Competitive sale:  A competitive sale of bonds operates like an auction.  Broker-dealers acting as underwriters or syndicates of underwriters bid against each other by submitting to the issuer on a given day at a given time a sealed bid to buy the issuer’s bonds and then reoffer them to investors.  The underwriter or syndicate of underwriters that submit the lowest interest cost for the bonds are awarded the competitive bid. 

Negotiated sale:  In a negotiated sale, the terms and price of the bonds are negotiated by the issuer through an agreement with an underwriter or syndicate of underwriters selected in advance of the sale.

A secondary market transaction does not involve the issuer, but is a transaction between two investors – a buyer and a seller.  Secondary market transactions involve a brokerage firm which acts either as an intermediary between the buyer and seller, or as a buyer or seller itself.  Market conditions, such as prevailing interest rates, supply and demand, and credit quality, among other variables, determine the price, which may differ from the par value or original price on the bond.

A retail order period is a special, designated order period in a negotiated sale during which only retail and professional retail investors may place orders for bonds.  The retail order period allows retail investors to place orders before institutional investors.  Occasionally, both retail and institutional investors place orders at the same time with retail investors receiving priority.

“Retail investors” are typically defined to include individuals as well as bank trust departments, investment advisors and money managers acting on behalf of individuals. Orders from residents are typically given priority over residents from other locations. Individuals may place orders directly with a broker, or they may have a bank trust department, investment advisor, or money manager place the order on their behalf.