Important Percentages for Chapter Five
Private Activity Bonds
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Private Business Tests |
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Private business use test |
Greater than 10% of bond proceeds are used to fund a nongovernmental entity |
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Private security or payment test |
Greater than 10% of debt service is paid for or secured by a property used by a private business |
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Private loan financing test |
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More than the lesser of $5 million or 5% of bond proceeds are used to provide a loan to a private business |
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Costs of issuance |
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No more than 2% of proceeds of private activity bonds may be used to pay costs of issuance |
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Exception: 3.5% of bond proceeds may be used to pay issuance costs for qualified mortgage revenue bonds |
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Qualified private activity bonds |
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95% of net proceeds must be spend on designated public purposes |
Arbitrage Rules
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Arbitrage Bonds |
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Materially Higher Yield |
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General investments |
1/8 of 1% |
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Refunding escrow |
1/1,000 of 1% |
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Any investment of replacement proceeds |
1/1,000 of 1% |
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Program investment (not student loan) |
1.5% |
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Qualified student loan |
2% |
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Tax-exempt debt obligation |
No yield |