SID Programs
Would you benefit from direct access to tax-exempt municipal debt? Thanks to First National Capital Markets and First National Bank, you don’t have to be an active buyer to take advantage of the financial returns offered by Sanitary and Improvement District (SID) debt. Our SID program allows you to share in the benefits of this segment of the municipal market without the demands and obstacles that the market so often presents. We purchase bonds and warrants issued by SID's in Nebraska’s Douglas and Sarpy counties, and then offer institutions non-recourse participations in separate identified pools of SID obligations.
Understanding the SID Market
Nebraska’s SIDs were created to assist in municipal development projects outside of the corporate limits of any city or village. Each district is legally authorized to issue warrants and bonds to finance construction, operation and maintenance of its public facilities; special assessments and property taxes are levied to pay principal and interest on these warrants and bonds. An SID enables the developer to share the costs of improving its infrastructure with the purchasers of improved lots within the development. The result is market-driven development funded with tax-exempt rates – and the opportunity for SID lenders to earn attractive returns. As a participant in the First National SID program, you can share in this opportunity without having to make the investment in time and personnel to develop your own full-service SID lending program.
Value of the SID Program
Diversification
Participation in a pool of both warrants and bonds can yield simultaneous lending in multiple SIDs of varying emphases, from commercial developments to residential housing. Because bonds and warrants issued by multiple SIDs within a pool carry different maturity dates and rates, you’ll be able to easily expand your SID lending potential by participating in just one pool.
Due Diligence
First National Bank screens and reviews each SID’s debt and gives a summary of this information to your institution. Information may include:
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County and metropolitan statistical information
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Type and location of the development along with proposed plat of the project
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Developer information and past experience
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Other parties such as the SID fiscal agent, attorney and engineering firm
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Detailed engineer’s estimates of construction costs and value of improvements at full development
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Build-out analysis with projected absorption rates
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Bond cash-flow analysis
Annually, your institution will be provided with updated information on each SID within the pool in which you are participating. These statistics may include:
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Audit on the SID
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Annual valuation per the county assessor
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Tax levy of the district
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Number of homes, units or buildings in the SID as well as number of vacant lots
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Warrants and bonds outstanding and fund balances as of December 31
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Updated county and metropolitan statistical information
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Pictures of activity within the SID
In addition, while the participations are sold on a non-recourse basis, First National Bank will continue to share in your SID experience by maintaining an interest in the SID loans it acquires.
Servicing
First National Bank and FNCM will be responsible for acquiring, servicing and monitoring the SID obligations in the pools. First National will see that all obligations meet customary issuance standards and will also actively collect the amounts due from your SIDs and pass them through monthly to you, the participant, along with a statement detailing cash activity, collections and disbursements. As a participant, you’re authorized to visit and inspect all books, accounts and records pertaining to your participations. The SID pools allow participants to purchase in standard denominations (e.g., $500,000), rather than in the cumbersome denominations carried by most SID warrants (e.g., $515,765.98).
Liquidity
FNCM will help enhance liquidity for participated SID obligations through a best efforts remarketing arrangement with First National Bank without any additional built-in cost to you, the participant. This should allow you to participate when you want or need to, rather than during regimented offering periods. Though the secondary market for SID debt is generally thin, if you decide to liquidate your participation, FNCM will use its best efforts to try to find a buyer for your interest.