All U.S. states will be able to have at least two cities or counties eligible to directly issue notes to the Federal Reserve’s Municipal Liquidity Facility (MLF), regardless of population, under changes expanding eligibility announced Wednesday by the Fed Board.
In addition, the Fed said governors of each state will be able to designate two issuers in their jurisdictions whose revenues are generally derived from operating government activities (such as public transit, airports, toll facilities, and utilities) to be eligible to directly use the facility, one of many facilities created by the Fed to help mitigate the economic impacts of the coronavirus (COVID-19) pandemic.
The Fed said the MLF continues to be directly open to U.S. states, the District of Columbia, U.S. cities with a population of at least 250,000 residents, U.S. counties with a population of at least 500,000 residents, and certain multistate entities.
The MLF term sheet shows that notes eligible for issuance to the MLF include tax anticipation notes (TANs), tax and revenue anticipation notes (TRANs), bond anticipation notes (BANs), revenue anticipation notes (RANs), and other similar short-term notes issued by eligible Issuers, provided that such notes mature no later than 36 months from the date of issuance. “In each case, a note’s eligibility is subject to review by the Federal Reserve,” it states. It also says relevant legal opinions and disclosures will be required “as determined by the Federal Reserve” prior to purchase.
The MLF was established under Section 13(3) of the Federal Reserve Act, with approval of the Treasury secretary. It will offer up to $500 billion in lending to states and municipalities, the Fed noted, to help manage cash flow stresses caused by the coronavirus pandemic.
An FAQ and appendix listing MLF limits were posted along with the term sheet.
Term Sheet: Municipal Liquidity Facility
Municipal Liquidity Facility: Frequently Asked Questions
Appendix A: Federal Reserve Municipal Liquidity Facility Limit per State