Bonds and Financing

Federal Reserve expands number of cities, counties that can access Municipal Liquidity Facility

The Federal Reserve on April 27 said that it is substantially expanding the number of cities and counties that can access the Municipal Liquidity Facility (MLF) being developed as part of the Economic Stabilization Fund of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

The revised facility will purchase up to $500 billion of short-term notes issued by U.S. states (including the District of Columbia), U.S. counties with a population of at least 500,000 residents, and U.S. cities with a population of at least 250,000 residents.

The new population thresholds allow substantially more entities to borrow directly from the MLF than the initial plan announced on April 9, which limited access to the MLF to states; counties with a population of 2,000,000 or more and cities with a population of 1,000,000 or more.

The Federal Reserve noted that the facility continues to provide for states, cities, and counties to use the proceeds of notes purchased by the MLF to purchase similar notes issued by, or otherwise to assist, other political subdivisions and governmental entities.

The American Public Power Association is strongly encouraging utilities to begin outreach to their states (and cities and counties listed here where appropriate) to begin to explore such assistance.

Meanwhile, the Federal Reserve is also considering expanding the MLF to allow a limited number of governmental entities that issue bonds backed by their own revenue to participate directly in the MLF.

The Federal Reserve said that any such decision would be publicly announced at a future date.

It said such an expansion would be available to a “limited number of governmental entities,” so it is possible such an expansion could include public power utilities.

The Federal Reserve also emphasized that it will continue to closely monitor conditions in 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.

The website announcing the change includes more information about the MLF, including a Frequently Asked Question: Appendix A  which lists cities and counties eligible to directly access the MLF under the revised population limits.

Treasury Department issued guidance on use of coronavirus relief funds

The Treasury Department last week released guidance on the use of $150 billion Coronavirus Relief Funds (CRF) to states as provided under the CARES Act, including a further explanation of necessary expenditures incurred due to the public health emergency.

Among other things, the Treasury Department offers an explanation of expenses that qualify as facilitating compliance with COVID-19-related public health measures.

According to Treasury, such expenses can include expenses to improve telework capabilities for public employees to enable compliance with COVID-19 public health precautions. It can also include the expense of providing paid sick and paid family and medical leave to public employees to enable compliance with COVID-19 public health precautions.

APPA is strongly encouraging public power utilities to consider pursuing these funds with their state or where appropriate their city or county.