Municipalities occasionally issue tax anticipation notes (TANs) and revenue anticipation notes (RANs) to bridge short-term mismatches between everyday ongoing expenditures and the scheduled periodic receipt of sales taxes, personal income taxes, ad valorem property taxes, or other governmental revenues. The COVID-19 pandemic and resulting federal and state government responses exacerbated budgeting disruptions for many localities. Tax-exempt TANs and RANs allow state and local governmental units to meet their working capital needs, but require thoughtful analysis of cash flow estimates, expected taxes or revenues, and the authorizing statute’s requirements and limitations, as well as rules related to arbitrage and rebate.

The experienced practitioners at Holley & Pearson-Farrer have assisted states, counties, school districts, municipalities, and other units of local government in these cash flow financings. We have served as bond counsel to clients issuing tax and revenue anticipation obligations to meet their budgetary needs.

For example, H|PF served as bond counsel in connection with two issuances of tax-exempt general purpose RANs aggregating $4.4 billion. The proceeds of the notes were used to temporarily finance fiscal year 2020-2021 budgetary needs of the State of New York, in anticipation of the collection of taxes and revenues following the federal government deferral of the federal income tax payment deadline due to the outbreak of COVID-19.

Additionally, the firm represented the Board of Education of the City of Chicago on multiple occasions as co-bond counsel in connection with TAN transactions related to the board’s revolving credit facility. The issuances allowed Chicago Public Schools to address immediate budgetary needs and to borrow at a lower interest rate than would have been available from traditional lending.


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