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<br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br /> <br />II. <br /> <br />III. <br /> <br />IV. <br /> <br />TAX-EXEMPT FINANCING TECHNIQUES <br /> <br />James W. Ziglar <br />Dillon, Read & Co. Inc. <br /> <br />I. <br /> <br />Introduction <br /> <br />A. Tax-exempt revenue financing is not a panacea for Colorado <br />water needs. <br /> <br />B. The consumer/taxpayer ultimately pays. <br /> <br />Legal basis for tax-exempt financing <br />A. State laws authorizing tax-exempt transactions. <br /> <br />B. Federal tax laws governing use of proceeds of tax-exempt <br />financings. <br /> <br />Creditworthiness - the essential ingredient <br /> <br />A. To finance a project, there must be a source of payment <br />for the bonds, notes or other obligations issued for that <br />purpose. <br /> <br />B. The more secure the source of payment, the more successful <br />the financing. <br /> <br />C. Many issuers must have a credit "created" for their pro- <br />jects <br /> <br />1. If not self-liquidating, funds must come from other <br />sources. <br /> <br />2. If partially self-supporting, back-up credit arrange- <br />ments or additional revenue sources must be found. <br /> <br />Sources of payment and credit arrangements <br /> <br />A. There are three potential sources of payment for tax- <br />exempt debt obligations <br /> <br />1. Project and project related revenues <br /> <br />(a) Revenues derived from projects that produce a <br />product or service for which there is a stable <br />market, such as water, electricity, sewage <br />treatment, etc., and which can be financed and <br />operated through the imposition of user rates, <br />fees and charges. <br />