An Overview on Municipal Bond Refundings
/Municipal securities, such as municipal bonds, can be refinanced (referred to as “refunded”) prior to their final maturity if they have an optional redemption date. By refunding outstanding municipal bonds, California school and community college districts have the opportunity to save their taxpayers money. Municipal bond refundings replace existing bonds with lower interest rate refunding bonds reducing the overall debt service payments made by California school or community college districts.
If the refunding bonds close within 90 days of the first optional redemption date, they are considered a current refunding. If the refunding close more than 90 days prior to the redemption date, they are considered an advanced refunding. Current refundings can be issued on a tax-exempt or taxable basis, while advanced refundings may only be issued on a taxable basis. Typically, tax-exempt bonds will have a lower interest rate than taxable bonds.