Accounting - Discussion # 5

Business & Finance
Price: $10 USD

Question description

Holly County needs a new county government building that would cost $24 million. 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 then will make yearly lease payments (of principal and interest) to repay the obligation. Unlike conventional municipal bonds, the lease payments are not binding obligations on the county and, therefore, require no voter approval.


  1. Who are the stakeholders in this situation?
  2. Do you think the actions of the politicians and the bankers in this situation are ethical?
  3. How do the tax-exempt securities used to pay for the building compare in risk to a conventional municipal bond issued by Holly County?

Tutor Answer

(Top Tutor) Daniel C.
School: New York University
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