Traverse County needs a new county government building that would cost $10 million. The politicians feel that voters will not approve a municipal bond issue to fund the building since it would increase taxes. They opt to have a state bank issue $10 million of tax-exempt securities to pay for the building construction. The county then will make yearly lease payments (of principal and interest) to repay the obligation. Unlike conventional municipal bonds, the lease payments are not binding obligations on the county and, therefore, require no voter approval. Required 1. Do you think the actions of the politicians and the bankers in this situation are ethical? 2. In terms of risk, how do the tax-exempt securities used to pay for the building compare to a conventional municipal bond issued by Traverse County?

Voters of Valdez School District, a public school district, approved construction of a new high school at a cost not to exceed $20 million.  The district will finance the construction by issuing $20 million of 6 percent term bonds payable in 20 years.  Because the site had already been prepared, the school district began construction immediately but the bonds would not be issued for nearly a year.  Shortly before the fiscal year-end, the school district borrowed $5 million from a local bank due in one year with interest at 6.2 percent.  The note will be repaid from bond proceeds.  The school district secured a financing agreement with the bank to convert the debt to a 10-year debt if the school district is unable to sell the bonds by the due date.  At year-end, how should the $5 million note be displayed  in the government-wide financial statements? A.) Notes payable-long term $5 million; B.) Notes payable-short term $5 million;  C.) Nothing D.) None of above

The Drug-Free Center, a growing nonprofit, is currently considering the construction of a new wing to extend its treatment building. After consulting with a law firm that specializes in municipal bonds, the nonprofit has decided to issue a tax-exempt municipal bond, taking advantage of the potential lower financing costs. The initial consideration of the bond issue is $50 million, and the bond issuance cost is estimated to be $1 million, including all professional services of the bond counsel and financial adviser, in addition to the underwriting firm. The full term of the bond issue is twenty years, in consideration of the economic life of the facility before the major renovation is needed. The interest rate is 6 percent, based on the market rate for tax-exempt municipal bonds for similar projects at the time. The city authority has agreed to issue the bond based on a signed inducement. You are the nonprofit's financial manager and are asked to create a bond structure and payment…

Officials for the city of Winfield have agreed to forgo real estate taxes normally charged to Jamieson Corporation for the subsequent 10 years. In exchange, Jamieson has agreed to build a distribution facility that is expected to hire 500 new employees. What information must the city provide in its financial statements to inform taxpayers and other interested parties about the nature of this tax abatement?

In response to a petition signed by the property owners of Riverdale Subdivision, the city of Pewaukee will oversee the installation of sidewalks, curbs, and gutters in the subdivision, to be accounted for in the city’s capital projects fund. Pewaukee reports on a calendar-year basis. Construction is estimated to cost $900,000 and will be financed by a $100,000 county grant, a $50,000 transfer from the city’s general fund, and special assessments of $750,000 to be levied against subdivision property owners. One-third of the levy is to be due on February 1 of each year, starting with 2018. The first $250,000 installment will be received by the capital projects fund directly. The remaining installments will be collected by the debt service fund and will be used to service the related bond debt. The project is to begin on January 15, 2018, and is to take 18 months to complete. It is estimated that 70% of the work will be completed during 2018.To cover construction costs, a 6%, $500,000…

A capital projects fund would probably not be used for which of the following assets? A. Construction and installation of new shelving in the mayor's office. B, Replacing a bridge. C. Financing and construction of three new fire substations. D. Purchase and installation of an entity-wide integrated computer system.