What it is:
An anticipation note is a short-term revenue.that a state or local government and expects to repay with imminent tax receipts, another or some other form of
How it works (Example):
Town XYZ wants to purchase a new building to replace the old City Hall. The building costs $10 million. Town XYZ expects to pay $5 million property tax filing deadline has passed, but the real estate deal is scheduled to close six months before that date, in October.for the building but needs to raise another $5 million. It expects to receive at least that much next April after the annual
Because of this timing situation, Town XYZ municipal bond), and so investors are generally able to obtain interest tax-free. The notes pay buyers 5% interest per year. (Remember, however, that the notes be outstanding for less than one year.)$5 million of tax anticipation notes that mature in May. Tax anticipation notes are a type of anticipation note (and a type of
Town XYZ is then able to purchase the building for $10 million in October. When April arrives, Town XYZ has its property tax receipts and uses a portion of them to repay the anticipation notes.