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Q&A
Council Member Brannan inquires about taxable bonds and interest rates
0:50:33
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73 sec
Council Member Justin Brannan questions Jacques Jiha from the NYC Mayor's Office of Management and Budget about taxable bonds, their uses, and interest rates. Jiha explains the types of projects that require taxable bonds and provides information on the interest rate spread between tax-exempt and taxable bonds.
- Taxable bonds are used for projects with private use and payments, such as affordable housing loans and economic development projects.
- The average spread between tax-exempt and taxable bond interest rates is about 1.5% to 2%.
- For a ten-year maturity over the last two years, the spread was approximately 1.9 percentage points.
Justin Brannan
0:50:33
Talking about taxable bonds.
0:50:35
So while all city debt is issued to finance projects with a public purpose, some capital projects are not eligible to utilize federal tax exempt bonds.
0:50:47
Could you tell us what sort of projects are not eligible to be financed by tax exempt bonds?
Jacques Jiha
0:50:53
Pursuant to federal tax rule, projects that have both private use and actual or deemed private payments to the city may not be financed with tax exempt bonds.
0:51:09
This category includes affordable housing loans and many economic development projects.
0:51:16
So what we do is we give you all capital projects to ensure that they are properly designated as eligible for tax exempt or taxable bonds.
Justin Brannan
0:51:26
And what's the average spread between the interest rates on the city's tax exempt and taxable bonds?
Jacques Jiha
0:51:33
It's about one and a half to 2%.
0:51:35
And I believe on a ten year maturity of the last two years was about 1.9%.
0:51:42
Percentage point.
Justin Brannan
0:51:45
Okay.