§ 100404 Bond Interest And Redemption

This law says the VTA can sell bonds that earn up to 7% interest a year, paid twice a year, and it sets rules for how the bonds are printed, paid, and can be paid off early.

Key Takeaways

•Interest can’t be higher than 7% a year.
•Interest is paid twice a year (or once for a short first period up to a year).
•Bonds must be at least $1,000 each.
•If the city wants to pay the bond off early, it must write that on the bond.

Example

A city wants to raise $5,000,000 for a new bus line. It sells $1,000 bonds that promise 6% interest, paid every six months.

The city can only promise up to 7% interest, must pay the interest twice a year, and must write the bond’s face value ($1,000) on the paperwork. If it wants to pay the bonds back early, it has to write that option on the bond itself.

How to Calculate

Interest per half‑year = Principal × (Annual Rate ÷ 2)

Find the bond’s face value (the principal).
Take the yearly interest rate from the bond (it can’t be more than 7%).
Divide that yearly rate by 2 because interest is paid twice a year.
Multiply the principal by the result from Step 3. That gives the amount of money paid each six‑month period.

A $1,000 bond promises a 6% yearly interest rate.

Result: Interest each six months = 1000 × (0.06 ÷ 2) = 1000 × 0.03 = $30. The bondholder gets $30 every six months.

The bonds shall bear interest at a rate or rates not exceeding 7 percent per annum, payable semiannually, except that the first interest payable on the bonds or any series thereof may be for any period not exceeding one year as determined by the board. In the resolution or resolutions providing for the issuance of the bonds, the board may also provide for call and redemption of the bonds prior to maturity at times and prices and upon other terms as it may specify, but no bond shall be subject to call or redemption prior to maturity unless it contains a recital to that effect or unless a statement to that effect is printed thereon. The denomination or denominations of the bonds shall be stated in the resolution providing for their issuance, but shall not be less than one thousand dollars ($1,000). The principal of and interest on the bonds shall be payable in lawful money of the United States at the office of the treasurer of the VTA or at another other place or places as may be designated, or at either place or places at the option of the holders of the bonds. The bonds, or the series thereof, shall be dated and numbered consecutively and shall be signed by the chairman of the board and the treasurer, countersigned by the secretary and the official seal of the VTA attached. The interest coupons of the bonds shall be signed by the treasurer. All signatures, countersignatures, and the seal may be printed, lithographed, or mechanically reproduced, except that one of the signatures or countersignatures on the bonds shall be manually affixed. If any officer whose signature or countersignature appears on bonds or coupons ceases to be an officer before the delivery of the bonds, his signature is as effective as if he had remained in office. (Amended by Stats. 2016, Ch. 381, Sec. 88. (AB 2196) Effective January 1, 2017.)

This law says the VTA can sell bonds that earn up to 7% interest a year, paid twice a year, and it sets rules for how the bonds are printed, paid, and can be paid off early.

Key Takeaways

•Interest can’t be higher than 7% a year.
•Interest is paid twice a year (or once for a short first period up to a year).
•Bonds must be at least $1,000 each.
•If the city wants to pay the bond off early, it must write that on the bond.

Example

A city wants to raise $5,000,000 for a new bus line. It sells $1,000 bonds that promise 6% interest, paid every six months.

How to Calculate

Interest per half‑year = Principal × (Annual Rate ÷ 2)

Find the bond’s face value (the principal).
Take the yearly interest rate from the bond (it can’t be more than 7%).
Divide that yearly rate by 2 because interest is paid twice a year.
Multiply the principal by the result from Step 3. That gives the amount of money paid each six‑month period.

A $1,000 bond promises a 6% yearly interest rate.

Result: Interest each six months = 1000 × (0.06 ÷ 2) = 1000 × 0.03 = $30. The bondholder gets $30 every six months.

Key Takeaways

Example

How to Calculate

Key Terms

References

§ 100404 Bond Interest And Redemption

Key Takeaways

Example

How to Calculate

Key Terms

References

Key Takeaways

Example

How to Calculate

Key Terms

Related Statutes

References

Key Takeaways

Example

How to Calculate

Key Terms

Related Statutes

References