FAQ

When you buy a GO bond issued by the State of West Virginia, you make a loan to the State. The bond purchased in return for your money is, in effect, an IOU – the State’s promise to repay the amount of money borrowed (the principal), plus interest, in a specified period of time. All GO bonds are general obligations of the State to which the full faith and credit of the State is pledged. If there are not sufficient funds to pay the debt service on the GO Bonds the State is obligated to collect an annual State tax sufficient to pay the principal and interest on the bonds.

Yes. State of West Virginia GO bonds must be approved by a majority of the electorate voting at a general or special election.

Revenue bonds are a form of long-term borrowing State agencies use to finance projects. Revenue bonds are secured by a revenue-generating program such as the State’s lottery or a revenue generating projects, such as water projects, toll-road projects, or other public facilities. Income generated by the program or project goes toward paying the principal and interest on the bonds. Revenue bonds do not require voter approval and unlike GO bonds, neither the State’s full faith and credit, nor its taxing power is pledged towards the repayment of revenue bonds.

Lease revenue bonds (LRBs) are a type of revenue bond. Lease revenue bonds usually finance the construction of facilities, including State office buildings and correctional facilities. However, unlike revenue bonds that primarily use money generated by a program (lottery) or a project (water systems) to repay investors, lease revenue bonds have a lessee (government agency) that pays rent to use the facility. The rental payments are then used to pay investors who purchased the bonds that financed the construction of the facility. For State issued Lease Revenue Bonds, lease payments come primarily but not exclusively from annual appropriations from the State’s General Fund.

• Interest Rate - The State pays interest to investors in exchange for the use of the borrowed money. The interest rate is a percentage of the principal (the amount borrowed), payable for the use of the borrowed money. Interest on bonds with fixed interest rates typically is compounded and paid semiannually. Interest on bonds with variable interest rates is payable at a rate that changes periodically based on specified criteria and is typically paid monthly.
• Price - The price is the amount investors are willing to pay for bonds based on certain variables, including current market rates, supply and demand, credit quality, maturity, and tax status. Keep in mind that prices and yields move in opposite directions. When market yields increase, the value (price) of a bond decreases, and vice versa.
• Yield - The yield generally refers to the return an investor earns on the bond, taking into account the price the investor paid for the bond, which may differ from the face value or par amount of the bond. The yield is calculated in two ways: based on the market price and interest rate; or by taking into account a number of other factors, including maturity date, optional redemption date(s), and the time between interest payments. Investors should consult their brokers or other financial advisors to learn more about yield and the different ways to measure it.
• Maturity - Maturity is the date when the principal on the bond is scheduled to be repaid to the investor. The State generally sells bonds that have maturities between 1 and 25 years. In general, the further out the maturity date, the higher the yield on the bond.
• Redemption Provisions - Some bonds contain provisions that allow the State to redeem, or “call,” all or a portion of the bonds, at specific prices, prior to their maturity dates. Bonds frequently are called when interest rates are lower than when the State originally sold the bonds. Bonds with certain redemption provisions usually offer investors higher yields to compensate for the risk that the bonds might be called early. When the State redeems a bond, it pays the holder the principal amount and any interest earned since the last interest payment. However, the holder does not typically receive the interest that would have been earned if the bond had been allowed to reach its maturity date. Holders of bonds that have been called for redemption are notified of the upcoming payment.

Many municipal bonds are rated by one or more of the three major rating agencies: Fitch Ratings, Moody’s Investors Service, and S & P Global Ratings. A credit rating is an independent assessment of the creditworthiness of the bonds. An explanation of the significance and status of credit ratings may be obtained from the rating agencies furnishing such rating. For more information about credit ratings, the current ratings for the State’s GO bonds and other outstanding indebtedness can be found in the Bond Rating section of the State’s investor website.

Taxable means that the interest you earn on the bond is not excludable from federal income taxes and may or may not be exempt from West Virginia state personal income taxes. For additional information about the tax status of specific bonds, read the "Tax Matters" section of the preliminary official statement or official statement for those bonds.

The POS is an informational disclosure document released prior to the offering of a new issue of bonds that describes the proposed bonds prior to final determination of the maturity amounts, interest rates and offering prices/yields. The POS contains preliminary information on the terms and conditions of the bond sale including the purpose, security features, and discloses economic, financial and legal information applicable to the bonds. The POS should be used by potential investors to evaluate the structure and credit quality of the bonds.

The pricing/sale date is the day the interest rate, yield, and price for each maturity of a bond issue are established and buyers place orders to purchase such bonds with their broker. The pricing/sale period can last one, two or more days.

• Competitive sale: A competitive sale of bonds operates like a sealed first price auction. Broker-dealers acting as underwriters or syndicates of underwriters bid against each other by submitting to the issuer on a given day at a given time a sealed bid to buy the issuer’s bonds and then reoffer them to investors. The underwriter or syndicate of underwriters that submit the lowest interest cost for the bonds are awarded the competitive bid.
• Negotiated sale: In a negotiated sale, the terms and price of the bonds are negotiated by the issuer through an agreement with an underwriter or syndicate of underwriters selected in advance of the sale.

Typically, the minimum denomination is $5,000 and whole multiples thereof.

Potential investors are strongly encouraged to read the associated preliminary official statement or official statement and consult a licensed financial professional in order to understand the potential risks and potential benefits associated with a particular municipal security.

Most municipal securities may be sold prior to maturity with the assistance of a brokerage firm. If an investor sells a municipal security prior to maturity, he or she may receive more or less than the original investment depending on prevailing market interest rates, supply and demand, perceived credit quality of the securities, and the costs incurred in connection with the sale (sales commission), among other variables. In addition, investors should consult a tax advisor for any tax implications.

A refunding bond is a bond issued to refinance outstanding bonds generally to reduce the issuer’s interest costs. Proceeds of a refunding bond issue are typically deposited into an escrow fund to pay the debt service on the outstanding bond obligations that are refinanced either at their scheduled maturity date or at an earlier redemption date.

New bond issues are sold in the primary market. In a new issue, all of the terms are set, including the initial price and interest rates, and the bonds are sold to investors, with the issuer receiving the proceeds.

A secondary market transaction does not involve the issuer, such as the State of West Virginia, but is a transaction between two investors – a buyer and a seller. Secondary market transactions involve a brokerage firm which acts either as an intermediary between the buyer and seller, or as a buyer or seller itself. Market conditions, such as prevailing interest rates, supply and demand, and credit quality, among other variables, determine the price, which may differ from the par value or original price on the bond.

The State does not sell bonds directly to investors. See Buy Bonds section of the State’s investor relations website for step-by-step directions on how to buy bonds.

A retail order period is a special, designated order period in a negotiated sale during which only individual investors and professional retail investors may place orders for bonds. A retail sale is a separate negotiated sale during which only individual investors and professional retail investors may place orders for bonds. The retail order period and the retail sale allow retail investors to place orders before institutional investors. Occasionally, both retail and institutional investors place orders at the same time with retail investors receiving priority.

"Retail investors" are typically defined to include individuals as well as bank trust departments, investment advisors and money managers acting on behalf of individuals. Orders from West Virginia residents submitted during a retail order or retail sale are typically given priority over residents from other states. Individuals may place orders directly with a broker, or they may have a bank trust department, investment advisor, or money manager place the order on their behalf.

Individuals should consult their licensed financial advisor or broker to learn about any particular process the firm may have for participating in the State’s bond sales. Before placing an order, investors are advised to read the entire Preliminary Official Statement for the specific bond sale to obtain information essential to the making of an informed investment decision.