Revenue Anticipation Notes

Revenue Anticipation Notes (“RAN”) are tax-exempt, short-term securities used as a cash management tool. Colleges and universities issue RANs to supplement their general fund cash reserves for the fiscal year and to act as a cushion for any temporary cash flow needs that may be experienced. Colleges and universities are often faced with the difficult situation of trying to fund regular monthly expenditures with irregular receipts such as tuition, grants, and other special revenue. Proceeds from the sale of a RAN issue may be used to cure imbalances by the mismatch between revenues and expenditures.

RAN proceeds that are not needed to cover cash flow imbalances can be invested in higher-yielding taxable securities. Revenue opportunities can occur when a positive “spread” exists between taxable and tax-exempt interest rates. Given the tax-exempt nature of RANs, investors are willing to accept a lower interest rate on RANs relative to other “taxable” investment alternatives. Therefore, educational institutions can borrow at interest rates considerably lower than those available to private entities.

RAN notes are currently offered on both a rated and unrated basis. In order to qualify for the short-term Standard & Poor’s rating, certain institutions may be required to secure a supporting letter-of-credit. Please contact the Authority for further details on the issuance of Revenue Anticipation Notes.