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voters in the area have elected to become a Mello-Roos district,they are responsible for the repayment of these bonds through a special tax, assessed annually based on the value of the properties within the district Mello-Roos financed developments might include schools, roads, libranes, police and fire protection stations This type of financing is named after Henry Mello and Mike Roos of the California legislature, who sponsored legislation in 1982 to authorize this form of financing 6 8 General Obligation(GO) Bonds In California, GO Bonds require a supermajority voter approval Most GO bonds are backed by the issuer's ability to level ad valorem tax in amounts sufficient to meet debt service requirements 6 9 Certificate of Participation and Lease Revenue Bonds Also known as `COP', this security that represents a share of an issuer's lease payment When a City finances a public facility through a lease-purchase transaction, the interest in that City's lease payment often is assigned to a third party that issues certificates of participation The certificates represent a share of the lease payment to be received by the investor Comparison of Financing Methods General Obligation Bonds Revenue Bonds * Strong market acceptance * Debt is secured by system users * Significant structuring flexibility * Debt limits not applicable * Favorable interest rates * Higher interest costs than GO's * No reserve fund requirement * Debt service reserve required * No trustee required * Trustee required * Voter approval usually required * Voter approval usually not required * Pledge of general credit required * Coverage covenants usually included * Difficult to enter market * Limited revenues available to secure debt Special Assessment&Mello Roos Bonds Certificates of Participation * Voter approval usually not required * Voter approval usually not required * Debt limits may not apply * Debt limits not applicable * Debt is secured by beneficiaries * Good market acceptance * Complexity greater than GO's * Complexity greater than GO's * Market concerns about defaults * Risk of citizen opposition * Limited revenues to secure debt * Limited revenues to secure debt * Higher interest costs due to higher risk * Less secure than GO Bond 6 10 Competitive Sale of Bonds The terms and pnces of the bonds will be negotiated by the City and various underwriters through a bidding process amongst approved, impartial underwriters and/or underwriting syndicates Both the City and the underwriter collaborate in the origination and pricing of the bond issue The issue is awarded to the underwriter judged to have submitted the best