Liz Claman interviews JT Thompson


On January 30, 2018, JT Thompson, Portfolio Manager of Aquila Tax-Free Fund For Utah, was interviewed by Liz Claman, Financial Journalist and TV Host, for Asset TV.  Topics discussed during the interview include the impact of tax reform legislation on the municipal bond market, the importance of the revenue stream that secures a municipal bond, the appeal to investors of investing locally through municipal bonds, and opportunities in the municipal bond market.  You will find more information on the Fund, including the Prospectus, on this site.


Before investing in a Fund, carefully read about and consider the investment objectives, risks, charges, expenses, and other information found in the Fund prospectus.  The prospectus is available from your financial advisor, and when you call 800-437-1020 or visit www.aquilafunds.com.


Aquila Churchill Tax-Free Fund of Kentucky Annual Shareholder Meeting


Shareholders of Aquila Churchill Tax-Free Fund of Kentucky are cordially invited to attend their annual shareholder meeting Thursday, April 19, 2018 at 8:30 a.m. at The Olmsted, 3701 Frankfort Avenue, Louisville, Kentucky. A buffet breakfast will be served prior to the meeting.

Attendees will have the opportunity to visit with Fund Executives, Trustees, the Portfolio Manager, and hear Ryan Barrow, Executive Director of the Kentucky Finance and Administration Cabinet, which is part of the Office of Financial Management. The Office is responsible for the investment and debt management functions of the Commonwealth, including conducting the state’s bond sales, which provide financing for major projects such as those in which your fund invests. Mr. Barrow was named one of 40 rising stars by Bond Buyer in 2016.

Please plan to attend.  We look forward to seeing you on April 19.


Money Life Interview with Sandy Rufenacht


On December 27, 2017 Sandy Rufenacht, Co-Portfolio Manager of Aquila Three Peaks High Income Fund, was interviewed by Chuck Jaffe for the MoneyLife podcast.  Mr. Rufenacht discussed his expectations for Fed policy, rates, and the fixed income markets in 2018.  You can listen to a replay of that interview here, and you’ll find more information on the Fund, including the Prospectus, on this site


Before investing in a Fund, carefully read about and consider the investment objectives, risks, charges, expenses, and other information found in the Fund prospectus.  The prospectus is available from your financial advisor, and when you call 800-437-1020 or visit www.aquilafunds.com.


The Right Time for a Cautious Strategy?


There has been good news on the economic front recently:  global trade has improved significantly, wage growth is beginning to rise, and the unemployment rate is falling, although the underemployment rate (focused on advanced skills not being used) remains over 8%.  With some improvement in the economy, the Fed, along with other major central banks, is moving toward a reduction in monetary stimulus.  Even so, a new Fed President is likely to move cautiously in his first year, trying to avoid market dislocations.

The potential for an uptick in inflation appears to be a possibility under the combined influence of improved economic growth, a tightening labor market, and the potentially stimulative effect of tax cuts.  A number of market observers are anticipating that the Fed could implement several rate increases of 25 basis points over the course of 2018, if economic growth and inflation appear to be stable or rising, and that we could see a yield of 3% on the 10-year Treasury.

In the current market environment, caution may be an appropriate strategy for bond investors.


There are favorable technical conditions present in the municipal bond market currently.  New issue supply in 2018 is expected to be lower while demand for tax-exempt bonds from individual investors in high-tax states is expected to rise.  Those dynamics may mitigate volatility in the municipal market.  There is also a potential benefit associated with higher rates in that they can provide an opportunity to invest the proceeds of maturing bonds in issues with a higher yield. Read more “The Right Time for a Cautious Strategy?”


Municipal Bonds and Tax Legislation


On December 20, 2017, the U.S. House and Senate passed the Tax Cuts and Jobs Act, and the President signed the legislation on December 22, 2017.

Significant aspects of the legislation, related to municipal bonds, include:

  • Preservation of the tax exemption applicable to interest on public purpose state and local government bonds
  • Preservation of the tax exemption applicable to interest on qualified private activity bonds
  • Advance refunding bonds issued after December 31, 2017 will no longer be tax exempt

Generally, efforts to retain the tax exemptions applicable to municipal bonds were successful.  In anticipation of the change in status of advance refunding bonds, many issuers across the country have been bringing new advance refunding bonds to market ahead of the year-end deadline, increasing near-term supply.  Going forward, the available supply of municipal bonds may be reduced by a decline in this type of issuance.

According to the Wall Street Journal, the alternative minimum tax, “on individuals, a parallel tax that disallows personal exemptions and state deductions for high-earning households, is narrowed. As a result, the Tax Policy Center estimates, only 200,000 households will likely pay it instead of 5.2 million.”


Updated 2017 Capital Gain Information


UPDATED:  Aquila Three Peaks Opportunity Growth Fund paid a capital gain distribution on December 1, 2017 in the amounts indicated below.                         Printable Version


Aquila Three Peaks Opportunity Growth Fund                            $0.42                    $2.29

Aquila Three Peaks Opportunity Growth Fund:  The fund had a record date of November 30, 2017, an ex-date of December 1, 2017, a payable date of December 1, 2017, and a reinvestment date of December 1, 2017.


The funds listed below may pay a capital gain distribution in December, 2017.  The amount reflected represents an estimate, per share, as of the date indicated.



Aquila Three Peaks High Income Fund1                             $0.00                    $0.01

Aquila Tax-Free Trust of Arizona2                                       $0.00                    $0.02

Aquila Churchill Tax-Free Fund of Kentucky2                      $0.00                    $0.01

1 The total amount of the capital gain above cannot be reduced by any losses taken in November, 2017.

Represents undistributed gains from fiscal year 2017 which must be distributed in 2017 and which cannot be reduced. Read more “Updated 2017 Capital Gain Information”


Pre-Refunded Bonds: A Quick Lesson


All seven of Aquila Group of Funds’ Single-State Municipal Bond Funds, which focus on high credit quality and providing a high level of double tax-exempt income, hold Pre-Refunded Municipal Bonds. These bond issues – when backed by US Treasury Securities – are considered to be the highest-quality, and often provide higher current income than new municipal bond issues during periods of declining interest rates.

What is a pre-refunded municipal bond?

Just like home owners, in declining interest rate environments, municipalities often take the opportunity to refinance their outstanding debt – but it’s not as simple as taking out an additional loan to pay off what is due. Bond issuers are obligated to pay interest to bond holders for a specific amount of time – to maturity or a call date. Interest rates may drop to an attractive level years before the call date or maturity – and this may present the opportunity for a bond issue to become pre-refunded.

Here is how it works:

  • Bond X is issued in 2010 to fund new roads at a 5.5% interest rate with a 30-year maturity in which the issuer is permitted to pre-pay or “call” in 2020.
  • Interest rates drop in 2014 to 3.0% – 6 years prior to the first call date for Bond X.
  • The issuer of Bond X issues Bond Y in 2014 at a 3% interest rate.
  • The proceeds from the sale of Bond Y are invested in a combination of securities and cash, in this case US Treasury securities, which are held in an escrow account administered by a trustee with a 2020 maturity corresponding to the call date of Bond X.
  • Now Bond X is backed by Moody’s/Fitch Aaa/AAA rated US Treasury securities and is a pre-refunded bond issue.
  • In some cases pre-refunded bonds are defeased, which means that the bonds have gone from being an obligation of the issuer to an obligation supported by securities held in the escrow fund, or in this case by US Treasury securities. After defeasance, the bonds are no longer considered an obligation of the issuer.

Read more “Pre-Refunded Bonds: A Quick Lesson”


Harvey, Irma and the Muni Market


With two hurricanes recently making landfall in southern states, only eleven days apart and inflicting what may be as much as $230 billion in damages, the potential impact to municipal credits is on investors’ minds. While both hurricanes made landfall in areas with booming economies and population growth, history tells us that the fiscal strength of the affected municipalities and the rapid relief efforts are likely to limit negative impacts on municipal bonds.

Hurricane Harvey hit Houston as a category 4 storm on August 25th and stayed over the area for several days dropping as much as 50 inches of rain in Harris County, which includes the city of Houston, and surrounding areas. Houston is the nation’s fifth largest municipal economy and Harris County is home to over four million people. Read more “Harvey, Irma and the Muni Market”


Consumer resources related to Equifax data breach


Following are resources which may be valuable to consumers concerned about the recent Equifax data breach.

Federal Trade Commission

Free credit freezes from Equifax, Lisa Weintraub Schifferle, Attorney, FTC, Division of Consumer & Business Education

Fraud alert or credit freeze – which is right for you?, Lisa Weintraub Schifferle, Attorney, FTC, Division of Consumer and Business Education

The Equifax Data Breach: What to Do, Seena Gressin , Attorney, Division of Consumer & Business Education, FTC

To report identity theft and get a recovery plan, visit Federal Trade Commission IdentityTheft.gov

Read more “Consumer resources related to Equifax data breach”


Hawaii raises state income tax rates for 2018


Hawaii’s 2017 Legislative Session resulted in several changes to the State’s tax laws. The full report can be accessed here. Act 107 amends the income tax law to reduce the tax burden of lower-income taxpayers. Along with adjustments to two other programs, it will reinstate three tax brackets for the highest-income taxpayers beginning with the 2018 tax year.

The 2009 Legislature imposed new tax brackets, 9%, 10% and 11% for taxable income over certain levels, depending on filing status. These increases were repealed on December 31, 2015. Beginning with tax returns after December 31, 2017, these three rates will be reinstated as follows:

  • Taxpayers who file a joint return will pay:
    • 9.00% on taxable income over $300,000, but not over $350,000
    • 10.00% on taxable income over $350,000, but not over $400,000
    • 11.00% on taxable income over $400,000
  • Heads of a household will pay:
    • 9.00% on taxable income over $225,000, but not over $262,500
    • 10.00% on taxable income over $262,500, but not over $300,000
    • 11.00% on taxable income over $300,000
  • Unmarried individuals and married individuals who file separately will pay:
    • 9.00% on taxable income over $150,000, but not over $175,000
    • 10.00% on taxable income over $175,000, but not over $200,000
    • 11.00% on taxable income over $200,000

Individuals affected by these changes may find tax-exempt municipal bonds to be a beneficial investment. Using the new 2018 three top federal tax brackets along with the highest 2018 Hawaii state income tax rate and the Net Investment Income Tax, the chart at left illustrates what a taxable investment would have to yield to match a 2% double tax-free investment in the tax brackets indicated.

A print version of this is available here.

The Net Investment Income tax is a 3.8% tax established by the Patient Protection and Affordable Care Act (PPACA) that applies to the lesser of (1) net investment income or (2) the excess of a taxpayer’s modified adjusted gross income (MAGI) in excess of an applicable threshold amount. For more information, please consult your professional tax advisor.