Villages 07
The way I understand it as a result of early payoff by residents the CDD's are able to pay off the bonds early and they are "Auctioned off" as to which bonds will be redeemed. This is in addition to the call feature. Obviously I dont have a 100% grasp of the concept (you may want to google Bond Sinking Fund) but I do know "These" particular bonds do have a sinking fund feature in addition to the Call feature. This will not be a problem unless some of the bonds you hold are auctioned off during the first year which is unlikley. SO if you strated with $30K of bonds they amy call $5K in auction..you would get the $5K and now have $25 remaining.
Here is one definition of sinking fund
Sinking Fund
A bond with special funds set aside to retire the term bonds of a revenue issue each year according to a set schedule. Usually takes effect 15 years from date of issuance. Bonds are retired through either calls, open market purchases, or tenders.
You may want to check with your bond seller to see if your bonds have this sinking fund and how it woud or could effect your investment. Again its only bad if the auction occurs during the first year OR you are set i your ways and expect to be drawing 6.5% tax free and the auction occurs and you are force to find another investment for your money.
Another nice feature after talking to FMS is since the bond must be in street name with a registered broker, FMS will transfer , at no cost, the bond holding to any other broker where you have an account. That would eliminate having another account with holdings as well as a money market sweep account unless you wanted the semiannual payments sent to your house directly.
|