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December 9, 2016

Homework Help: accounting

Posted by Candace on Wednesday, March 2, 2011 at 9:34am.

Brevard County needs a new county government building that would cost $24 million dollars. 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 $24 million of tax exempt securities to pay for the building construction. The county will then make yearly lease payments to repay the obligation. Unlike conventional municipal bonds, the lease payments are not binding obligations on the county and, therefore, require no voter approval.

Do you think the actions of the politicians and the bankers in this situation are ethical?

How do the tax exempt securities used to pay for the building compare in risk to a conventional municipal bond issued by Brevard County?

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