Montana Bonds (Montana Municipal Bonds)

 

 

Montana bonds (Montana Municipal Bonds) are issued by state as well as state-authorized establishments for principally financing infrastructure development ventures. Montana municipal bonds are an ideal option due to their impressive credit ratings of AA by Fitch and S&P, and Aa2 by Moody’s.[br]   

 

Types of Montana Bonds

On the whole, there are three types of major Montana municipal bond offerings:

 

General Obligation (GO) Montana Bonds

Issuance of GO Montana municipal bonds requires obtaining permission from the state legislature. The amount of Montana GO bond issue is governed by Montana statues. Used primarily for financing long-term capital projects, these bonds are pledged by the ‘full faith and credit’ of the State. This implies that a default on the GO bond issue is covered by setting up local taxes. Due to the full backing of the State, GO bonds are a secure investment option. However, the added security comes at the cost of lower interest rates. Moreover, the introduction of additional taxes could significantly increase the tax burden on Montana citizens.

 

Revenue Montana Bonds

The amount of State debt acquired through the issuance of revenue bonds is not subject to bonded indebtedness under Montana law. However, these bonds are not pledged by the ‘full faith and credit’ of the State. Instead, the principal and interest payments on these bonds are pledged by the revenue collected from the relevant project. Montana revenue bonds are mostly issued for funding water and sewer projects in the region. Only self-supporting facilities and projects can be financed through the issue of these bonds.[br]

 

Special Improvement District (SID) Bonds

SID Montana bonds are only issued after the establishment of special improvement districts, which are usually backed by a special revolving fund. These bonds are exclusively intended for construction and maintenance of infrastructure in these districts. The issuance of these assessment bonds does not require a public referendum. However, it requires an approval from all landowners in the district for undertaking the improvement. SID bonds come with higher interest rates as they have a greater risk, since they are not pledged by the ‘full faith and credit’ of the State.

 

Besides these, Montana bonds are also issued by non-government entities for funding infrastructure development. These bonds are known as Montana private activity bonds. Some private activity bonds may qualify for tax-exemption, although there is a volume cap on their issue. For 2007 and 2008, this cap was $256.235 and $262.095, respectively.