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Municipal Liquidity Facility: Frequently Asked Questions
The following is intended to address questions about the Municipal Liquidity Facility (MLF or
Facility). The Federal Reserve may periodically update these FAQs and, therefore, please check
this website for new FAQs or revisions to a previously issued FAQ.
Effective June 3, 2020
A.

Purpose and Design

A1. Why is the Federal Reserve establishing the MLF?
The municipal securities market is an important part of the financial system, which helps provide
states, cities, and counties (and their political subdivisions and other governmental entities) with
the funding needed to provide essential public services to their citizens. Due to the COVID-19
pandemic, the municipal securities market has recently been under considerable strain. The
municipal securities market saw a dramatic increase in sales by institutional investors, which has
caused a swift and dramatic increase in interest rates on municipal securities. Although rates
have come down from their highs and some issuers have been able to issue debt or secure loans,
there are many issuers that have not been able to meet their financing needs through the capital
markets. At the same time, states, cities, and counties are facing severe liquidity constraints
resulting from the increase in state and local government expenditures related to the COVID-19
pandemic and the delay and decrease of certain tax and other revenues. By ensuring the smooth
functioning of the municipal securities market, particularly in times of strain, the Federal
Reserve is providing credit that will support families, businesses, and jobs in communities, large
and small, across the nation.
The immediate purpose of the MLF is to enhance the liquidity of the primary short-term
municipal securities market through the purchase at issuance of Tax Anticipation Notes (TANs),
Tax and Revenue Anticipation Notes (TRANs), Bond Anticipation Notes (BANs), Revenue
Anticipation Notes (RANs), and similar short-term notes from Eligible Issuers (defined below)
(collectively, Eligible Notes). The Eligible Issuer’s proceeds from the sale of Eligible Notes to
the special purpose vehicle (SPV) can in turn be used to support its political subdivisions and
public authorities, among other uses. The Facility will provide a form of cash management
financing to Eligible Issuers. In addressing the cash management needs of Eligible Issuers, the
Facility will also help restore confidence in the municipal securities market.
The Federal Reserve will continue to closely monitor conditions in the primary and secondary
markets for municipal securities and will evaluate whether additional measures are needed to
support the flow of credit and liquidity to state and local governments.
A2. How will the MLF work?
The MLF will provide a liquidity backstop to issuers of Eligible Notes through an SPV. The
Treasury Secretary, using funds appropriated to the Exchange Stabilization Fund under section
4027 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), will make an
1

initial equity investment of $35 billion in the SPV. The SPV will have the ability to purchase up
to $500 billion of Eligible Notes.
A3. When may Eligible Issuers begin selling Eligible Notes, and how long will the MLF
operate?
The MLF became operational on May 26, 2020. The SPV will cease purchasing Eligible Notes
on December 31, 2020, unless the Board and the Treasury Department extend the term of the
Facility.
A4. Under what legal authority are purchases of Eligible Notes through MLF made?
The Federal Reserve Board established the MLF pursuant to section 13(3) of the Federal Reserve
Act.
A5. What third-party vendors are supporting the MLF?
In April 2020, the New York Fed selected PFM Financial Advisors LLC (PFM) through an RFP
process to provide short-term consulting services to help the New York Fed design and set up the
MLF. PFM was selected based on, among other things, its knowledge of and experience in the
municipal securities market, as well as its assurances that it could effectively advise the New
York Fed within the short timeframe outlined in the RFP. The New York Fed also selected two
law firms, Arent Fox LLP and Orrick, Herrington & Sutcliffe LLP, after a search process, to
advise it with respect to design, setup and execution of the facility.
In May 2020, the SPV established by the New York Fed in connection with this facility,
Municipal Liquidity Facility LLC, designated BLX Group LLC (BLX) as its administrative
agent. In serving as the administrative agent, BLX will receive notices of interest and
applications from Eligible Issuers interested in selling notes to the SPV. BLX will review those
notices and applications based on criteria established by the New York Fed and will be available
to respond to questions from Eligible Issuers. Decisions to purchase Eligible Notes will be in the
sole discretion of the SPV.
A6. Where should questions regarding the MLF be directed?
Questions should be directed through
http://www.federalreserve.gov/apps/contactus/feedback.aspx?refurl=/muni/ or via email to
MLF@ny.frb.org.
A7. How may I receive updates regarding changes to MLF documents?
Sign up for email alerts.
B.

Eligible Issuers

B1. Who is an Eligible Issuer?
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An Eligible Issuer is a State, City, or County (or, subject to Federal Reserve review and
approval, an entity that issues securities on behalf of the State, City, or County, respectively, for
the purpose of managing its cash flows), Multi-State Entity, or Designated RBI, in each case as
defined below. Pursuant to section 13(3) of the Federal Reserve Act, an Eligible Issuer may not
be insolvent.
An Eligible Issuer that is a State, City, or County (or, subject to Federal Reserve review and
approval, an entity that issues securities on behalf of the State, City, or County, respectively, for
the purpose of managing its cash flows) must have been rated at least BBB-/Baa3 as of April 8,
2020, by two or more major nationally recognized statistical rating organizations (NRSROs).
Eligible Issuers that were rated at least BBB-/Baa3 as of April 8, 2020, but are subsequently
downgraded, must be rated at least BB-/Ba3 by two or more major NRSROs at the time the
Facility makes a purchase.
An Eligible Issuer that is a Multi-State Entity or Designated RBI must have been rated at least A/A3 as of April 8, 2020, by two or more major NRSROs. A Multi-State Entity or Designated
RBI that was rated at least A-/A3 as of April 8, 2020, but is subsequently downgraded, must be
rated at least BBB-/Baa3 by two or more major NRSROs at the time the Facility makes a
purchase.
Notwithstanding the foregoing, if a State, City, County, Multi-State Entity, or Designated RBI
was rated by only one major NRSRO as of April 8, 2020, it may be an Eligible Issuer under the
MLF if (i) the rating was at least BBB-/Baa3 (for a State, City, or County) or A-/A3 (for a MultiState Entity or Designated RBI); (ii) the State, City, County, Multi-State Entity, or Designated
RBI is rated by at least two major NRSROs at the time the MLF makes a purchase; and (iii) such
ratings are at least BB-/Ba3 (for a State, City, or County) or BBB-/Baa3 (for a Multi-State Entity
or Designated RBI).
For purposes of the Facility:
• A “State” is one of the fifty U.S. states or the District of Columbia;
• A “City” is a U.S. city that (i) has a population exceeding 250,000 residents or (ii) is a
Designated City (as defined below);
• A “County” is a U.S. county that (i) has a population exceeding 500,000 residents or
(ii) is a Designated County (as defined below); and
• A “Multi-State Entity” is an entity that was created by a compact between two or more
States, which compact has been approved by the U.S. Congress, acting pursuant to its
power under the Compact Clause of the U.S. Constitution.
For purposes of the definitions of “City” and “County,” population will be determined based on
the most recent available U.S. Census data as of April 6, 2020.
A list of States, Cities, and Counties that meet the above population thresholds and have an
issuance limit greater than zero dollars based on their general revenue from own sources and
utility revenue for fiscal year 2017 is provided in Appendix A. As of April 6, 2020, the most
recent data available on population size for cities was 2018 data, and the most recent data
3

available on population size for counties was 2019 data. Changes in population size, as may be
reflected in future U.S. Census Bureau releases, will not affect this list of Eligible Issuers.
B2. What is a “Designated City” or “Designated County”?
The Governors of U.S. states that have less than two cities and counties (on a combined basis)
with 250,000 and 500,000 residents, respectively, may designate cities and counties located in
their states for participation in the MLF, subject to certain limits. Any such designated cities will
be “Designated Cities” and designated counties will be “Designated Counties.”
Each Designated City and Designated County will be required to provide:
• at the time it submits a notice of interest, evidence that it has verified with the Governor
of its state that it will be designated and
• at the time of closing, a certification from the Governor of its state reflecting the
designation.
The maximum number of Designated Cities and Designated Counties (on a combined basis) that
each Governor of a U.S. state may identify is shown in the below table. The numbers set forth in
the below table were selected to ensure that each U.S. state has at least two total cities and
counties (on a combined basis) that may participate in the MLF. In determining the number of
cities and counties in each U.S. state that may participate in the MLF, cities and counties were
not counted if they have an issuance limit of zero dollars because they have no general revenue
from own sources and utility revenue for fiscal year 2017.
State
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana

Designated Cities
and Counties
1
1
0
2
0
0
2
1
0
0
1
2
0
0
2
0
0
1

State
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
4

Designated Cities
and Counties
2
0
0
2
0
0
0
0
2
0
0
0
0
2
1
2
0
0

Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri

2
0
0
0
0
2
0

Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming

0
2
0
0
2
0
2

B3. When choosing Designated Cities and Designated Counties, which cities and counties
may a state Governor choose?
A Governor that has the ability to designate one Designated City or Designated County may
choose either (i) the most populous city in his or her state that has less than 250,000 residents or
(ii) the most populous county in his or her state that has less than 500,000 residents.
A Governor that has the ability to designate two Designated Cities and Designated Counties (on
a combined basis) may choose any of the following combinations:
• The most populous city and most populous county;
• The most populous city and second-most populous city; or
• The most populous county and second-most populous county.
B4. What is a “Designated RBI”?
Each Governor of a U.S. state may designate up to two Revenue Bond Issuers located in his or
her state for participation in the MLF. The Mayor of the District of Columbia may designate one
Revenue Bond Issuer located in the District of Columbia for participation in the MLF. Any such
designated Revenue Bond Issuers will be “Designated RBIs.”
A “Revenue Bond Issuer” is a State or political subdivision thereof, or a public authority,
agency, or instrumentality of a State or political subdivision thereof, that issues bonds that are
secured by revenue from a specified source that is owned by a governmental entity.
Each Designated RBI will be required to provide:
• at the time it submits a notice of interest, evidence that it has verified with the Governor
of its state (or, in the case of a Designated RBI in the District of Columbia, the Mayor of
the District of Columbia) that it will be designated and
• at the time of closing, a certification from the Governor of its state (or, in the case of a
Designated RBI in the District of Columbia, the Mayor of the District of Columbia)
reflecting the designation.
B5. What is “an entity that issues securities on behalf of the State, City, or County for the
purpose of managing its cash flows,” as described in the “Eligible Issuer” section of the
MLF term sheet?

5

Many States, Cities, and Counties issue debt securities through an authority, agency, department,
division or other entity that is statutorily authorized to issue debt on behalf of the applicable
State, City, or County. Such an authority, agency, department, division or other entity of a State,
City, or County may also issue debt securities for the purposes of assisting in cash flow
management on behalf of one or more of the political subdivisions or other governmental entities
of the applicable State, City, or County. Such an entity would constitute an Eligible Issuer,
subject to Federal Reserve review, only if (i) such entity can commit the credit of, or pledge
revenues of, the applicable State, City, or County, or (ii) the State, City, or County guarantees the
Eligible Notes issued by such issuer. Each eligible State, City, and County may only access the
Facility through one issuer; provided that the Federal Reserve may approve one or more
additional issuers per State, City, or County to facilitate the provision of assistance to political
subdivisions and other governmental entities of the relevant State, City, or County.
B6. What is a “political subdivision or other governmental entity” as described in the
“Eligible Use of Proceeds” section of the MLF term sheet?
States, Cities, and Counties may use the proceeds of Eligible Notes sold to the SPV under the
MLF to purchase the notes of, or otherwise assist, any of their political subdivisions or other
governmental entities as described above. For purposes of the “Eligible Use of Proceeds”
section, a “political subdivision or other governmental entity” is broadly defined as any county,
city, municipality, township, village, school district, special district, utility, authority, agency or
other unit of government, as determined by the Eligible Issuer. However, an Eligible Issuer may
not lend the proceeds of Eligible Notes to a political subdivision or other governmental entity
that is insolvent.
B7. If an Eligible Issuer uses the proceeds of Eligible Notes to purchase the notes of one of
its “political subdivisions or other governmental entities” (as used in the “Eligible Use of
Proceeds” section), does the Facility assume the risk of those notes?
No. Regardless of the use of proceeds, the Facility (and any other holder of the Eligible Notes)
faces only the credit of the Eligible Issuer. The Eligible Issuer would bear the credit risk
associated with any notes it purchased from its political subdivision or other governmental entity.
B5. May governmental entities that provide public services on behalf of a State, City, or
County and issue bonds backed by their own revenues participate directly in the MLF as
Eligible Issuers?
In addition to Designated RBIs, other governmental entities that provide essential public services
on behalf of a State, City, or County may participate in the MLF indirectly by borrowing through
an eligible State, City, or County. The Federal Reserve continues to encourage Eligible Issuers
to make funding from the Facility available to their political subdivisions and other
governmental entities that are in need of such funding.
C.

Eligible Notes

C1. What are Eligible Notes?
6

Eligible Notes are 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.
C2. What are TANs, TRANs, BANs, and RANs?
States and other municipalities issue TANs, TRANs, and RANs or other similar short-term notes
to address the timing mismatch between the receipt of taxes or other revenues and ongoing
expenditures. TANs, TRANs, and RANs are generally backed by and rated based on the
anticipated receipt of tax and other revenues over the course of a fiscal year or longer, in
amounts sufficient to pay off the notes by maturity.
BANs are issued in anticipation of future bond issuance and are typically not secured by a
pledged revenue stream, but are rated based on the long-term credit rating of the issuer and its
assumed future market access for refinancing (either as new BANs or long-term bonds).
C3. What can the proceeds of the Eligible Notes be used for?
An Eligible Issuer may use the proceeds of the Eligible Notes purchased by the SPV for the
following purposes: (1) to help manage the cash flow effects of income tax deferrals resulting
from an extension of an income tax filing deadline; deferrals or reductions of tax and other
revenues or increases in expenses related to or resulting from the COVID-19 pandemic; and
requirements for the payment of principal and interest on obligations of the Eligible Issuer or its
political subdivisions or other governmental entities; (2) to purchase similar notes issued by, or
otherwise to assist, its political subdivisions and other governmental entities for the purposes
enumerated in clause (1); and (3) to fund the costs of issuing the Eligible Notes and paying the
SPV issuance fee.
C4. What form of note security will be required?
Note security will be subject to review and approval by the Federal Reserve. The source of
repayment and security for Eligible Notes will depend on the applicable constitutional and
statutory provisions governing the Eligible Issuer and should be generally consistent with the
source of repayment and strongest security typically pledged to repay publicly offered
obligations of the Eligible Issuer. Eligible Notes of Eligible Issuers that are not Multi-State
Entities or Designated RBIs will generally be expected to represent general obligations of the
Eligible Issuer, or be backed by tax or other specified governmental revenues of the applicable
State, City, or County. If the Eligible Issuer is an authority, agency, or other entity of a State,
City, or County, such Eligible Issuer must either commit the credit of, or pledge revenues of, the
State, City, or County, or have the State, City, or County guarantee the Eligible Notes issued by
such issuer. If the Eligible Issuer is a Multi-State Entity or Designated RBI, the Eligible Notes
will be expected to be parity obligations of existing debt secured by a senior lien on the gross or
net revenues of the Multi-State Entity or Designated RBI.
7

C5. Will the Eligible Notes or the Eligible Issuer be required to be rated?
Yes, an Eligible Issuer must meet certain ratings requirements regardless of the method of sale.
An Eligible Issuer that is a State, City, or County must have an issuer credit rating or a general
obligation rating of at least BBB-/Baa3 as of April 8, 2020, by two or more major NRSROs.
Any such Eligible Issuers that were rated at least BBB-/Baa3 as of April 8, 2020, but are
subsequently downgraded, must be rated at least BB-/Ba3 by two or more major NRSROs at the
time the SPV makes a purchase. An Eligible Issuer that is a Multi-State Entity or Designated
RBI must have been rated at least A-/A3 as of April 8, 2020, by two or more major NRSROs. A
Multi-State Entity or Designated RBI that was rated at least A-/A3 as of April 8, 2020, but is
subsequently downgraded, must be rated at least BBB-/Baa3 by two or more major NRSROs at
the time the SPV makes a purchase. Notwithstanding the foregoing, if a State, City, County,
Multi-State Entity, or Designated RBI was rated by only one major NRSRO as of April 8, 2020,
it may be an Eligible Issuer under the Facility if (i) the rating was at least BBB-/Baa3 (for a
State, City, or County) or A-/A3 (for a Multi-State Entity or Designated RBI); (ii) the State, City,
County, Multi-State Entity, or Designated RBI is rated by at least two major NRSROs at the time
the Facility makes a purchase; and (iii) such ratings are at least BB-/Ba3 (for a State, City, or
County) or BBB-/Baa3 (for a Multi-State Entity or Designated RBI).
The applicable credit to be used for the Eligible Notes must carry a long-term rating from at least
two NRSROs at the time of pricing. Regardless of the method of sale, the Eligible Issuer (or the
entity issuing Eligible Notes on its behalf) must provide, two business days prior to pricing, a
confirmation of all of the existing long-term ratings on the applicable credit to be used for the
Eligible Notes.
Consistent with municipal market practices and requirements, if an Eligible Issuer intends to first
offer the Eligible Notes through a competitive sale process, the Eligible Issuer must obtain
ratings for the Eligible Notes. The Federal Reserve will not require ratings on Eligible Notes
that are sold to the SPV without first conducting a competitive sale process.
C6. From which NRSROs will ratings be accepted?
For purposes of the MLF, “major NRSRO” means S&P Global Ratings, Moody’s Investor
Service, Inc., Fitch Ratings, Inc., and Kroll Bond Rating Agency, Inc.
C7. How will the Federal Reserve determine pricing under the MLF?
Under Section 13(3) of the Federal Reserve Act and the Board’s Regulation A, the interest rate
on the Eligible Notes must be a penalty rate, meaning a rate that is a premium to the market rate
in normal circumstances, affords liquidity in unusual and exigent circumstances, and encourages
repayment of the Eligible Notes and discourages use of the Facility as the unusual and exigent
circumstances that motivated the program recede and economic conditions normalize.
The SPV will purchase Eligible Notes with a fixed interest rate that is determined on the pricing
date of the Eligible Notes. The method of sale selected by an Eligible Issuer will not affect the
determination of the interest rate. The Federal Reserve’s pricing methodology will be publicly
8

available and applicable to all Eligible Issuers. The pricing methodology will be based on the
overnight indexed swap (OIS) rate for a comparable maturity plus a fixed spread that
corresponds with the ratings of the Eligible Notes and their relevant tax status. The ratings
considered in pricing the Eligible Notes will be all of the Eligible Issuer’s long-term ratings from
major NRSROs for the specific credit of the Eligible Notes at the time of pricing of the Eligible
Notes. If the credit has different ratings (i.e. “split ratings”), the applicable spread will be
determined by calculating an average of all of the confirmed ratings. If interest on the Eligible
Notes is not excluded from gross income for federal income tax purposes, the pricing of the
Eligible Notes will be calculated using the methodology for taxable notes. If the SPV purchases
multiple Eligible Notes from the same Eligible Issuer over the term of the MLF, pricing will be
determined based on the ratings as confirmed by the applicable major NRSROs on the pricing
date of each Eligible Note.
See Appendix B for the MLF pricing grid and methodology. This pricing grid and methodology
are subject to revision should market conditions change materially. Any such revisions will be
made available on the FRBNY’s website for the MLF.
C8. What is OIS?
An overnight indexed swap (OIS) is an interest rate derivative contract in which parties exchange
a payment priced at a fixed rate against a payment priced at an average overnight published
reference rate, such as the effective federal funds rate. The MLF will use the fixed OIS rate
based on the effective federal funds rate for the maturity that corresponds to the maturity of the
Eligible Notes.
OIS rate quotes are widely available from bond market service providers and vendors. The
Federal Reserve Bank of New York publishes a weekly table of MLF purchase rates on the MLF
website. Additional information regarding OIS is available at
https://www.cftc.gov/MarketReports/SwapsReports/DataDictionary/index.htm.
C9. May Eligible Notes have a maturity for which no direct OIS quote is available?
Yes. Eligible Issuers may select any maturity up to 36 months. If an Eligible Issuer selects a
maturity for which no direct OIS quote is available, the OIS rate for the Eligible Notes will be
calculated using a straight line interpolation of the direct OIS quotes for the nearest maturity that
is shorter than the Eligible Notes and the nearest maturity that is longer than the Eligible
Notes. The calculation will be conducted by the SPV on the pricing date of the Eligible Notes.
C10. How will the Eligible Notes be priced if the credit for the Eligible Notes has split
ratings?
To account for split ratings across different credit rating agencies, an average rating will be
calculated by assigning a numerical value to each outstanding rating of the credit for the Eligible
Notes from a major NRSRO and rounding the average of such numerical values to the nearest
numerical value that corresponds to a rating. If an average rating is equidistant between the
numerical value corresponding to one rating and the numerical value corresponding to another
9

rating, then the Eligible Issuer will be treated as having the lower rating. However, if a credit
has only two ratings from major NRSROs and one of the ratings is two or more gradations
higher than the other rating, then the Eligible Issuer will have the option to either (1) obtain a
third rating from a major NRSRO and price the Eligible Notes based on the average of its three
ratings or (2) price the Eligible Notes based solely on the lower of the two existing ratings.
See below for the numerical values that will be assigned to ratings and a hypothetical example.
Rating Mapping Table
Rating:
Aaa AAA
Value:
0
0
Aa1 AA+ Aa2 AA Aa3 AARating:
Value:
0.66 0.66
1
1
1.33 1.33
A1
A+
A2
A
A3
ARating:
Value:
1.66 1.66
2
2
2.33 2.33
Baa1 BBB+ Baa2 BBB Baa3 BBBRating:
Value:
2.66 2.66
3
3
3.33 3.33
Ba1 BB+ Ba2 BB Ba3 BBRating:
Value:
3.66 3.66
4
4
4.33 4.33
Hypothetical Example
Ratings of Security for Eligible
Notes

Numerical
Value

A1

1.66

A+

1.66

A

2

Average Numerical Value

1.77

Average Rating

A+/A1

C11. When will interest on the Eligible Notes be due?
Interest on Eligible Notes may be paid at such times as are consistent with applicable
constitutional and statutory requirements, provided that all interest will be due no later than the
maturity date of the Eligible Notes.
C12. Will interest on the Eligible Notes be required to be exempt from federal or applicable
local income taxes and accompanied by a tax opinion thereto?
No. The Eligible Issuer may issue taxable or tax-exempt Eligible Notes.
10

C13. Is there a prepayment right on the Eligible Notes?
With the approval of the SPV, Eligible Notes purchased by the SPV may be prepaid by the
Eligible Issuer at any time, in whole or in part, at par (or, in the case of Eligible Notes purchased
at a premium, par plus unamortized premium) plus accrued interest, prior to maturity.
C14. May Eligible Notes be refinanced through the Facility after December 31, 2020?
No. The Facility will no longer extend credit after its termination date, including by refinancing
any maturing Eligible Notes.
C15. May investors sell outstanding notes to the SPV?
No. The SPV will only purchase newly issued notes of Eligible Issuers. The SPV will not
purchase notes in the secondary market.
C16. Will Eligible Notes be required to have CUSIPs?
Yes, CUSIPs will be required regardless of the method of sale. The Eligible Issuer or its
financial advisor should obtain the CUSIPs. The Federal Reserve will not obtain CUSIPs.
C17. Will Eligible Notes be required to be DTC-eligible?
Yes. Closing will occur through DTC.
D.

Disclosure

D1. Will the Federal Reserve require disclosure from Eligible Issuers?
Consistent with municipal market practices and requirements, Eligible Issuers offering Eligible
Notes in a competitive sale process should anticipate providing the same level of disclosure
normally prepared in connection with a public offering of notes.
If the Eligible Issuer is not conducting a competitive sale process and is, therefore, not preparing
a disclosure document for public sale, then the Federal Reserve will review the financial
information and operating data provided by the Eligible Issuer on the Municipal Securities
Rulemaking Board’s Electronic Municipal Market Access system (EMMA) and on the Eligible
Issuer’s website. Eligible Issuers will be required to provide a direct link to the financial
information on their websites and EMMA. For Eligible Notes that are TRANs, TANs, RANs, or
other similar notes to be repaid from revenues of the Eligible Issuer, Eligible Issuers will also be
required to provide cashflow statements (prior year actuals and 12-month projections). The
Eligible Issuer also must explain statutorily required or policy-determined “set asides” from
taxes and revenue for repayment of TRANs, TANs, RANs, and other similar notes. If set-asides
are not required, the Issuer must provide a plan for the repayment of the notes. For Eligible
Notes that are BANs, the Eligible Issuer must provide its authorization to issue bonds to pay off
11

the BANs and explain why it expects to be able to issue such bonds on or before the maturity of
the BANs. Each Eligible Issuer will also be required to provide copies of written materials
containing financial information and operating data that have been provided to the rating
agencies in connection with the process to obtain confirmation of the Eligible Issuer’s ratings.
The Federal Reserve may also require that certain other additional publicly available information
be provided to it.
D2. Will the Federal Reserve require Eligible Issuers to provide continuing disclosure as
otherwise required by the Securities and Exchange Commission’s Rule 15c2-12?
Yes. Each Eligible Issuer will be required to provide the continuing disclosure described in Rule
15c2-12 regardless of the method of sale and whether or not the sale of the Eligible Notes would
otherwise be subject to Rule 15c2-12. The following requirements also will apply to all
transactions in which the SPV purchases Eligible Notes:
A. On the Eligible Issuer’s website, it must provide a report (1) of quarterly cash flows,
which will show actual and projected results, and (2) on the funding of planned setasides, with an explanation of any negative variances.
B. On the Eligible Issuer’s website, it must provide access to quarterly financial reports
and/or information in a format regularly provided to any governing body or otherwise
made public.
C. The Eligible Issuer will provide to the Federal Reserve, at 6 months prior to maturity
and at 3 months prior to maturity, a written report explaining how it will repay the
Eligible Notes at maturity. For BANs, such a report will identify any material credit or
other matters relating to issuing the bonds expected to take out any BANs.
D. The Federal Reserve may request, and will have the right to receive, other
information relating to the ability of the Eligible Issuer to repay the Eligible Notes when
payments become due. The Federal Reserve reserves the right to make public any and all
information that it receives pursuant to its rights described herein, including to Congress
or otherwise.
E.

Method of Sale and Process

E1. How will the MLF purchase Eligible Notes?
The MLF will purchase, through an SPV, Eligible Notes from Eligible Issuers. An Eligible
Issuer may conduct a competitive sale process, and the SPV will provide a commitment to
purchase Eligible Notes that are not awarded to bidders in the competitive sale. Alternatively, an
Eligible Issuer may sell the Eligible Notes directly to the SPV without the Eligible Issuer first
undertaking a competitive sale process. Each Eligible Issuer will specify its preferred method in
the MLF Notice of Interest.

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E2. How will the MLF purchase notes from an Eligible Issuer that cannot legally enter into
a direct purchase transaction with the SPV, even after a competitive sale process?
The SPV generally will not submit a bid in a competitive sale process, but instead will serve as a
backstop and agree to purchase Eligible Notes that are not awarded to other bidders. The SPV
will arrange to submit a bid in a competitive sale process only in cases where an Eligible Issuer
(i) is required by law to sell Eligible Notes through a competitive sale process and (ii) does not
have the authority to sell Eligible Notes directly to the SPV, even following a competitive sale
process in which fewer than all of the Eligible Notes are sold.
E3. Does the Federal Reserve prefer one type of sale over the other?
No. The Eligible Issuer may choose between a competitive sale process, with the SPV providing
a commitment to purchase Eligible Notes that are not awarded to bidders in the competitive sale
process, or a direct sale to the SPV without first undertaking a competitive sale process. A
competitive sale process may be a traditional “all or none” process whereby one bidder is
awarded the entire amount of the offered securities or a “modified Dutch auction” whereby
multiple bidders may bid for and be awarded portions of the total par amount of securities
offered. As the SPV commences operation and completes purchases, the Federal Reserve
reserves the right to indicate a preference or require one type of sale in the future.
E4. What are the steps to participate in the MLF?
Interested issuers will be required to complete a Notice of Interest (NOI).. The NOI is designed
to provide the Federal Reserve with an indication of the Eligible Issuers that intend to sell
Eligible Notes. The Eligible Issuer will be notified when the NOI package has been approved
and may then move forward at the appropriate time with documentation of the transaction.
Prior to the mailing of a Preliminary Offering Statement (POS) in a competitive transaction and
prior to pricing of any transaction, the Eligible Issuer must submit an Application. Upon
approval of the Application, the SPV will commit to purchasing Eligible Notes and pricing may
proceed. Eligible Issuers should expect that closing conditions and schedules will be
substantially consistent with the conditions and schedules typical for such Eligible Issuer’s
securities.
Sample application materials and related documents are available on the MLF website.
Application forms are being developed and will be posted on the MLF website when available.
E5. When should an Eligible Issuer submit an NOI?
The MLF is not a “first come, first served” program. An Eligible Issuer should not submit an
NOI until it has determined its financial needs and schedule. Each Eligible Issuer has been
allocated a certain maximum amount of available MLF funds. A list of the allocated amount for
each eligible State, City, and County is provided in Appendix A. Each eligible Multi-State
Entity and Designated RBI has also been allocated a certain maximum amount of available MLF
funds based on its audited financial statements for fiscal year 2019 (see “How much of an
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Eligible Issuer’s Eligible Notes may the MLF SPV purchase?”). There is no preference given
to early filers.
E6. Will Eligible Issuers be limited to one issuance of Eligible Notes to the SPV?
No. An Eligible Issuer may sell Eligible Notes in one or more issuances to the SPV up to, in the
aggregate, the Eligible Issuer’s allocated amount. The Eligible Issuer should submit a separate
NOI for each requested issuance of Eligible Notes at such time as it has determined its financial
needs and schedule for such portion of its allocated amount. Eligible Issuers should not use the
MLF as a line of credit by conducting frequent, small issuances. The Federal Reserve may
establish a maximum number of issuances per issuer or a minimum par amount per issuance.
E7. Will the Federal Reserve provide forms for Eligible Notes and sale documents, or will
Eligible Issuers be expected to provide their own documentation?
Each Eligible Issuer should expect to use its standard form of note and the documentation that it
typically uses when selling its securities. Each Eligible Issuer will also be required to submit
evidence of compliance with the MLF program requirements. Following approval of the Eligible
Issuer's application, the Federal Reserve will provide a purchase commitment to memorialize the
terms of the transaction and the conditions to funding. The SPV and the Federal Reserve will not
execute closing or other certificates relating to the transaction.
F.

Other Terms

F1. How much of an Eligible Issuer’s Eligible Notes may the MLF SPV purchase?
For a State, City, or County, the SPV may purchase Eligible Notes in one or more issuances of
up to an aggregate amount of 20% of the general revenue from own sources and utility revenue
of the Eligible Issuer (or its associated State, City, or County if the Eligible Issuer is an authority,
agency or other associated entity) for fiscal year 2017. The maximum aggregate amount may be
used for the benefit of both the Eligible Issuer and its respective political subdivisions and other
governmental entities. The SPV may purchase Eligible Notes issued by or on behalf of a MultiState Entity or Designated RBI in one or more issuances of up to an aggregate amount of 20% of
the gross revenue as reported in the audited financial statements of the Multi-State Entity or
Designated RBI for fiscal year 2019. An Eligible Issuer (other than a Multi-State Entity or
Designated RBI) may request that the SPV purchase Eligible Notes in excess of the limit in order
to assist its political subdivisions and other governmental entities that are not eligible for direct
issuance to the Facility. If necessary, the Federal Reserve will establish procedures for
requesting and allocating additional Eligible Note purchase amounts.
F2. What is an Eligible Issuer’s “general revenue from own sources and utility revenue”?
An Eligible Issuer’s “general revenue from own sources and utility revenue,” which is used to
calculate issuance limits for the Facility, is calculated using the most recent available data for all
States, Cities, and Counties from the U.S. Census Bureau, the “2017 State & Local Government
Finance Historical Datasets and Tables.” The Board’s calculation of the general revenue from
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own sources and utility revenue for each eligible State, City, and County is provided in
Appendix A, along with the Board’s methodology for its calculations. In the case of an Eligible
Issuer that is an authority, agency or other entity of a State, City, or County, the applicable
“general revenue from own sources and utility revenue” shall be that of the State, City, or
County that formed the Eligible Issuer. The list in Appendix A may be revised if changes are
made to the MLF. Please check this website for any revisions and sign up for email alerts.
F3. Is there a fee associated with the Facility?
Yes, each Eligible Issuer must pay an origination fee equal to 10 basis points of the principal
amount of the Eligible Issuer’s Eligible Notes purchased by the SPV. The origination fee may
be paid from the proceeds of the issuance.
F4. Will the Federal Reserve disclose information regarding transactions entered into by
the MLF?
The Federal Reserve will publicly disclose information on a monthly basis regarding the MLF
during the operation of the Facility, including information regarding names of participants,
amounts borrowed and interest rates charged, and overall costs, revenues and other
fees. Balance sheet items related to the SPV and MLF will be reported weekly, on an aggregated
basis, on the H.4.1 statistical release titled “Factors Affecting Reserve Balances of Depository
Institutions and Condition Statement of Federal Reserve Banks,” published by the Federal
Reserve. In addition, the Federal Reserve will disclose to Congress information pursuant to
Section 13(3) of the Federal Reserve Act, as amended by the Dodd-Frank Wall Street Reform
and Consumer Protection Act, and the Board’s Regulation A.
F5. What legal opinions and certifications will be required?
Eligible Issuers will be required to deliver standard legal opinions for the issuance of debt,
including, but not limited to, an opinion of nationally recognized note counsel as to the validity,
enforceability, and binding nature of the notes. Each Eligible Issuer must also provide a written
certification that it is unable to secure adequate credit accommodations from other banking
institutions and that it is not insolvent. Further information on required legal opinions and
certificates will be determined and publicly announced prior to commencement of the MLF.
F6. For the purposes of participating in the MLF, what does it mean for an Eligible Issuer
to certify that it is unable to secure adequate credit accommodations?
The Federal Reserve must obtain evidence that participants in the MLF are unable to secure
adequate credit accommodations from other banking institutions. In certifying whether the
issuer is unable to secure adequate credit accommodations from other banking institutions,
issuers may consider economic or market conditions in the market intended to be addressed by
the MLF as compared to normal conditions, including the availability and price of credit. Lack
of adequate credit does not mean that no credit is available. Lending may be available, but at
prices or on conditions that are inconsistent with a normal, well-functioning market.
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