FAQ

Step 1 - Learn about the bonds

Read the Preliminary Official Statement (POS) available from this web site or from the participating brokers to learn more about the bonds, including their security, maturity dates, credit ratings, the types of projects they finance and other information that you may find important to help you make an informed investment decision. This website is not an offer to sell any bonds.

Step 2 - Open a brokerage account

You must have an account with one of the brokerage firms participating in the bond sale, or with another firm that can place an order through a brokerage firm participating in the bond sale. Please check to determine if your broker can place an order through the participating brokers. (If you have a brokerage account, go to Step 3.) If you do not have an account, you may open one and purchase bonds during the Retail Sale Order Period. A list of brokers participating in the sale can be found on the left side of this page.

Investors are encouraged to begin the New Account process well in advance of the sale date. Depending on the brokerage firm, internal new account procedures may take some time to process.

Step 3 - Place your order

Contact the broker with whom you have an account, either online or by phone, to get more information about how to buy bonds during the Retail Sales period. Discuss with the broker the number of bonds, the maturity date and the price at which you are willing to purchase the bonds, as well as any questions you may have from examining the Preliminary Official Statement (POS).

Tax-exempt means that, in the opinion of legal counsel, the interest you earn on the security is exempt from federal income taxes and from California personal income taxes. Read the “Tax Matters” section of the official statement for the bond sale to learn about the bonds’ tax status.

The interest earned on revenue bonds issued by SVCW is exempt from federal and state income tax, subject to rules relating to tax-exempt bonds set forth in the Internal Revenue Code. Read the “Tax Matters” section of the official statement for the bond sale to learn about the bonds’ tax status.

Municipal bonds and notes can be an important part of a diversified investment portfolio. Because bonds and notes typically have a predictable stream of payments of principal and interest, many people invest in them to preserve and increase their capital, or to receive dependable interest income. Additionally, the interest earned on municipal securities typically is exempt from federal and state income taxes.

It is important to remember that investment objectives, and the best strategies for achieving those objectives, depend on an individual investor’s particular circumstances. The tax advantage investors reap from tax-exempt securities will vary according to their income level.

Credit Risk - Risk that the issuer is unable to pay scheduled principal and interest on a timely basis. To evaluate the credit quality of an issuer, examine its credit rating and review the Preliminary Official Statement of the offering, which contains detailed financial information of the issuer.

Interest Rate Risk - When interest rates decrease, bond and note prices increase, and when interest rates increase, bond and note prices decrease. Interest rate risk is the risk that changes in interest rates may reduce (or increase) the market price of a security. For investors who own a bond or note until its maturity, interest rate risk is not a concern.

Interest Rate – SVCW pays interest to investors in exchange for the use of the loaned money. The interest rate is a percentage of the principal (the amount borrowed), accruing over a specified period. Interest on bonds or notes with fixed interest rates typically is compounded and paid semiannually. Interest on bonds or notes with variable interest rates accrues at a rate which changes periodically based on specific criteria.

Price - The price is the amount investors are willing to pay based on certain variables, including current market yields, supply and demand, credit quality, maturity and tax status. Keep in mind that price and yields move in opposite directions. When market yields increase, the value of a bond or note decreases, and vice versa.

Yield - The yield generally refers to the return an investor earns on the bond or note. The yield is calculated in two ways: based on the market price and interest rate; or by taking into account a number of factors, including interest rate, market price, maturity date and the time between interest payments. Investors should consult their brokers or other financial advisors to learn more about yield.

Maturity - Maturity is the date when the principal on the bond or note is scheduled to be repaid to the investor. SVCW generally sells bonds that have maturities between 1 and 30 years. In general, the further out the maturity date, the higher the investor’s yield.

Redemption Provisions - Some bonds or notes contain provisions that allow SVCW to redeem, or “call,” all or a portion of the bonds or notes, at specific prices, prior to their maturity dates. Bonds frequently are called when interest rates are lower than when SVCW sold the bonds. Bonds or notes with redemption provisions usually offer investors higher yields to compensate for the risk that the bonds might be called early. When SVCW calls a bond or note, it pays the holder the principal amount and any interest earned since the last interest payment. However, the holder does not receive the interest that would have been earned if the bond had been allowed to reach its maturity date. Holders of callable bonds or notes are notified of impending calls. Investors can find out if their State bond or note has been called by calling SVCW Finance at (650) 591-7121. Investors should have their CUSIP (Committee on Uniform Securities Identification Procedures) number – a unique identifying number – available when calling.

Creditworthiness - Most municipal bonds and notes are rated by one or more of the three major rating agencies: Fitch Ratings, Moody’s Investors Service, and Standard & Poor’s.  A credit rating is an independent assessment of the creditworthiness of the bonds.  It measures the probability of timely repayment of principal and interest of a bond or note.  Higher credit ratings indicate the rating agency’s view that there is a greater probability the investment will be repaid. More information about credit ratings, the current ratings for SVCW revenue bonds and a history of SVCW bond ratings can be found at its investor relations website.

Most municipal securities may be sold prior to maturity with the assistance of a brokerage firm. If an investor sells a municipal security prior to maturity, he or she may receive more or less than the original price depending on prevailing market interest rates, supply and demand, and perceived credit quality of the securities, among other variables. In addition, investors should consult a tax advisor for any tax implications.

The taxable equivalent yield is the return on a taxable investment that makes it equal to the return on a tax-exempt security of the same credit quality. The Securities Industry and Financial Markets Association (SIFMA) maintains a calculator on its website (www.investinginbonds.com) that computes the taxable equivalent yield of a tax-exempt security, depending on an individual’s State and Federal income tax bracket.

When an issuer sells a new issue, it is referred to as a primary market sale. In a new issue, all of the terms are set, including the price and interest rates, and the securities are sold to investors, with the issuer receiving the proceeds of the sale. The initial sales commission paid to broker-dealers is paid by the issuer, such as SVCW, from the proceeds. A retail investor who would like to participate in a primary market transaction must have an account with, and purchase the securities through, a brokerage firm serving as one of the issuer’s underwriters or selling group members.

A secondary market transaction does not involve the issuer, but is a transaction between two investors – a buyer and a seller. Secondary market transactions involve a brokerage firm which acts either as a liaison between the buyer and seller, or as a buyer or seller itself. Buyers pay sales commissions to brokerage firms to compensate them for their services in facilitating the transaction. Market conditions, such as prevailing interest rates, supply and demand, and credit quality, among other variables, determine the price, which likely will differ from the original price.

Revenue bonds are a form of long-term borrowing government agencies use to finance an income-generating project, such as water projects, higher education facilities or other public facilities built with the proceeds of the financing. Income generated by the project goes first toward meeting debt service on the bonds (i.e., paying interest to bondholders) and retiring the bonds at maturity. Unlike general obligation bonds, revenue bonds are not backed by an agency’s full faith and credit, or its taxing authority.

SVCW Revenue Bonds are limited obligations of the Authority, which are payable solely from and secured solely by the Revenues pledged under the Indenture, consisting primarily of payments made by the City of Redwood City, the City of San Carlos, and the West Bay Sanitary District (the “Participating Members”) under the Financing Agreements. The Bonds do not constitute an indebtedness of the Authority, the Participating Members, the State of California or any political subdivision or agency thereof within the meaning of any constitutional or statutory provisions. Neither the faith and credit nor the taxing power of the State of California, nor any political corporation or subdivision or agency thereof, nor the faith and credit of the Authority or the Participating Members, is pledged to the payment of the principal of or interest on the Bonds.