Defending Tax-Exempt Status of Municipal Bonds


On March 9, 2017 a bi-partisan letter was sent by U.S. Congressmen to the House Ways and Means Committee asking that leadership reject any proposal to cap or eliminate the deduction on tax-exempt municipal bonds used to finance the vast majority of infrastructure projects in America’s communities.  The letter was signed by 156 Congressmen; 94 Democrats and 61 Republicans.

As Congress considers tax reform and infrastructure financing, those signing the letter expressed their strong support for tax-exempt municipal bonds as an important tool which, for more than a century, has provided states and local governments with a reliable and efficient means of financing.

Factors cited in support of maintaining the municipal bond tax-exemption include:

  • Municipal bonds are pro-growth investments which spur job creation, help our economies grow, and strengthen our communities
  • Millions of Americans depend on municipal bonds for their economic security, and invest in them because of their low-risk nature
  • Nearly 75% of municipal bond investors earn less than $200,000 per year, and more than 75% are 55 or older
  • A combination of local control and local responsibility make municipal bonds an incredibly effective and efficient tool
  • Federal tax exemption reduces the cost if issuing municipal bonds, but local voters pay the interest and principal on municipal bonds

The letter concludes by stating that the current tax-exempt status of municipal bonds contributes to efficient economic growth that benefits all Americans.

Separately on March 9th, the Securities Industry and Financial Markets Association (SIFMA) commented on the American Society of Civil Engineers 2017 Infrastructure Report Card, saying “the 2017 ASCE Report Card clearly shows the desperate need for a strong commitment to infrastructure investment, which will help spur job creation and economic growth. SIFMA strongly advocates that the tax exemption for municipal bond interest remain intact, so that it may continue to help America’s cities and states boost their local economies through the construction of new projects such as roads, hospitals and schools.”

As Congress begins consideration of tax reform and infrastructure spending, we encourage you to contact your Congressional members to express your views on the tax-exempt status of municipal bonds.


We Mourn the Passing of Trustee, Nancy Wilgenbusch


Nancy Wilgenbusch, an independent trustee of Aquila Tax-Free Trust of Oregon, passed away in February, 2017.  Ms. Nancy Wilgenbusch served with great integrity and distinction as a member of the Board of Trustees of Aquila Tax-Free Trust of Oregon since 2001.

Trustees and Officers of Aquila Tax-Free Trust of Oregon, and the staff of Aquila Investment Management LLC benefited greatly from her personal integrity, valuable business insight, and dedication to the interests of the shareholders of the Trust. All who worked with Ms. Wilgenbusch held her in high esteem and respected her unique and consistent ability to cut to the heart of any issue and make her points with strength and conviction.

On behalf of the Trust, we express our sincere appreciation and gratitude for Ms. Wilgenbusch’s contributions during her tenure as a Trustee of the Trust, and for her dedication to the interests of the Trust’s shareholders and the citizens of Oregon.


A Good Time for Munis


Asset TV Interview:  Is it a good time to consider municipal bonds?

Aquila Group of Funds portfolio manager, JT Thompson, was interviewed in January, 2017 by Asset TV for a program regarding opportunities in the municipal bond market.  Mr. Thompson highlights objectives of the new administration, such as infrastructure spending, tax reform and regulatory reform, and the need for portfolio managers to be nimble in order to take advantage of any opportunities resulting from these initiatives.  JT also discussed other key topics of interest to municipal bond investors.

We think you’ll find the interview insightful and informative.

Each Aquila Group of Funds state-specific municipal bond fund in invests in investment grade bonds and maintains an average intermediate portfolio maturity, in order to manage credit and interest rate risk.

Shares of the Funds may only be sold by offering the Funds’ Prospectus. 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 on this site, from your financial adviser, and when you call 800-437-1020.

If you experience difficulty viewing this video on your equipment, you may also view it by registering (at no cost) on the Asset TV site.


Aquila Group of Funds’ Municipal Bond Funds Recognized by U.S. News and World Report


Aquila Group of Funds’ seven single state municipal bond funds were recently included in a US News and World Report Best Funds list for Municipal Single State Intermediate Funds.

For over 30 years, we have sought to provide municipal bond fund investors with double tax-exempt income and preservation of capital. We seek to manage interest rate and credit risk by consistently maintaining broadly-diversified, high-quality bond portfolios with an intermediate average maturity.

Our locally based portfolio managers and credit analysts have an up-close perspective on bond issuers and the economy in their states. We believe this gives them valuable insights about the economic and political climate of the state and the financing needs and the capabilities of individual issuers.

The U.S. News Mutual Fund scores assigned to the 65 funds included in the Municipal Single State Intermediate Category is produced using an equal weighting of the overall ratings provided by their data sources (Morningstar, S&P, Lipper Leaders, Zacks, and TheStreet.com ), and was published on 11/22/16. Individual fund rating systems are normalized to a 100-point scale based on point totals assigned to individual scoring systems. For example, each star from Morningstar would receive 20 points. The U.S. News score is calculated by dividing total points awarded according to their system by the five data sources. The Combined U.S. News Mutual Fund Score ranks funds numerically based on the score and funds with identical scores are awarded the same numerical ranking.

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 prospectuses are available on this site, from your financial adviser and when you call 800-437-1020.


Municipal Market Outlook


Due to the recent outcome of the U.S. Election, and the accompanying expectation of a large infrastructure spending program that could increase inflationary pressures, the municipal market has experienced an increase in municipal yields and a decline in market values. While there is significant uncertainty concerning policy changes that may be implemented by the new administration, there are still overall positive underlying themes to the municipal market that we think investors should keep in mind.

• Interest rate increases tend to reduce the supply of new municipal bond issuance coming to market which helps mitigate supply/demand imbalances.

• Muni bond yields, as a percentage of Treasuries, which are relatively attractive at these levels, have historically encouraged traditional taxable buyers to cross-over into the municipal bond market.

• An increase in the Federal Funds rate had been widely-anticipated by the markets, based on commentary from the Fed, and was likely reflected in recent bond prices.  A wide range of economic factors, domestically and globally, will affect the markets’ reaction to the rate increase.

• There have been occasions, over the past 10 years, when the municipal bond market sold off. At some level, buyers were attracted by the values seen in municipal bonds, and the market subsequently rebounded, as illustrated below. This past performance is no guarantee of future results.

Index chart


We expect market volatility to continue until we get more clarity on President-elect Trump’s policies and his ability to pass the proposals he offered during his campaign through Congress. We have positioned our municipal portfolios in anticipation of higher rates, and with the expectation of potentially being able to take advantage of buying opportunities.


Oregon’s Retirement Conundrum


Tim Iltz VP, Municipal Bond Credit Analyst

Tim Iltz
VP, Municipal Bond Credit Analyst

Oregon’s Public Employees Retirement System (PERS) has once again become front page news in anticipation of the release of the 2017-19 contribution rates. The headline making news this week is that PERS now has an unfunded liability which has reached $21.8 billion or $16.2 billion when including side accounts. However, it is important to keep in mind that approximately 900 public employers participate in Oregon’s PERS, including school districts, special districts, cities, counties, and state agencies. Each of these participants has a different contribution rate and surplus or liability. System wide, rates are estimated to increase by 4.66% or 3.62% on a weighted basis.

While none of this is good news for participating Oregon local governments, it does not impact all participants equally. For example, Junction City School District and South Lane School District are both located in Lane County, and both serve the mission of educating K-12 students. However, Junction City School District has a total net contribution rate of 22.33% of covered payroll for tier-one/tier-two employees while South Lane School District has a net contribution rate of 4.37% of covered payroll. These rates are also affected differently by the proposed increases; Junction City School District’s contribution rates are estimated to increase an additional 4.61% to 26.94% while South Lane School District’s rates are estimated to increase 3.69% to 8.06%. Due to the large variance in rates and liabilities, we review each holding on an individual basis rather than resorting to broad generalizations. Read more “Oregon’s Retirement Conundrum”


Hawaiian Tax-Free Trust Shareholder Meeting on September 29, 2016


Shareholders of Hawaiian Tax-Free Trust are cordially invited to attend their annual shareholder meeting Thursday, September 29, 2016 at 10:00 a.m. at the Ala Moana Hotel, Hibiscus Ballroom, 410 Atkinson Drive, Honolulu, Hawaii.

Shareholders may also attend the shareholder outreach meeting on Tuesday, September 27, 2016 at 5:00 p.m. at the Maui Arts & Cultural Center, Haynes Meeting Room, One Cameron Way, Kahului, Hawaii.

Attendees will have the opportunity to visit with Trust Executives, Trustees, the Portfolio Managers and hear renowned Hawaii economist Paul H. Brewbaker speak about the Hawaii economy.

Please plan to attend. We look forward to seeing you.


Aquila Tax-Free Fund For Utah Shareholder Meeting on October 20, 2016


Shareholders of Aquila Tax-Free Fund For Utah are cordially invited to attend their annual shareholder meeting Thursday, October 20, 2016 at 8:30 a.m. at the Little America Hotel, 500 South Main Street, Salt Lake City, Utah. 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 Utah State Senator and former Trustee, Lyle Hillyard speak about the Utah economy.

Please plan to attend. We look forward to seeing you.


Aquila Tax-Free Trust of Arizona Shareholder Meeting on November 10, 2016


Shareholders of Aquila Tax-Free Trust of Arizona are cordially invited to attend their annual shareholder meeting Thursday, November 10, 2016 at 9:30 a.m. at JW Marriott Scottsdale Camelback Inn Resort and Spa, Scottsdale, Arizona.

Shareholders may also attend the shareholder outreach meeting on Wednesday, November 9, 2016 at 10:00 a.m. at Westward Look Wyndham Grand Resort and Spa, Tucson, Arizona.

Attendees will have the opportunity to visit with Fund Executives, Trustees, the Portfolio Manager and hear guest speaker and Trustee Grady Gammage, Founding Member; Gammage & Burnham, PLC, and author of “The Future of the Suburban City: Lessons from Sustaining Phoenix”.

Please plan to attend. We look forward to seeing you.


Improving Municipal Bond Disclosures


The municipal bond market includes over 50,000 state and local government issuers, which range from small school districts to the largest cities and states.  As borrowers, these issuers are required by their continuing disclosure undertakings to produce annual financial reports, which include material information that may impact the value of their outstanding bonds.

The Securities and Exchange Commission (“SEC”) has been engaged in a multi-year initiative to enhance the disclosures provided by municipal issuers, and the agency recently announced that it had reached settlements with 71 state and local issuers related to deficiencies in their disclosures.  The director of the SEC enforcement division said that these settlements are expected to heighten the level of attention given to disclosures and improve compliance. Read more “Improving Municipal Bond Disclosures”