Early tax returns are demonstrating the importance of tax-exempt income


Many Americans are anxious to find out what the Tax Cuts and Jobs Act of 2017 (TCJA) means for their 2018 filings, and early returns being filed now are giving us some clues. It appears that quite a few taxpayers will either be getting smaller refunds than last year, or may even be owing the government more money than they had in the past.

There were some very visible changes to tax law with the TCJA of 2017. One was the standard deduction increase which is now $12,000 for single filers, and $24,000 for married filing jointly – up from $6,350 and $12,700, respectively. While this may seem like a boon for most taxpayers who can now take almost double the standard deduction available in the previous year, the benefit has been dampened by another more visible tax law change – the State and Local Tax deduction limit, commonly referred to as the “SALT” deduction. The $10,000 cap on SALT deductions may not seem like a big deal at first, but the Personal Property Tax deduction – property taxes paid on homes, cars, boats, etc. – is no longer unlimited. This hits high-tax states such as New York, California, and Connecticut, among others, particularly hard. Taxpayers in these states may have been accustomed to deducting as much as two to three times the current cap for their property taxes alone. The SALT cap potentially puts many more families close to the standard deduction, where it may no longer make sense for them to itemize their taxes. Read more “Early tax returns are demonstrating the importance of tax-exempt income”


Aquila Narragansett Tax-Free Income Fund Annual Shareholder Meeting


Shareholders of Aquila Narragansett Tax-Free Income Fund are cordially invited to attend their annual shareholder meeting Tuesday, March 19, 2019 at 9:00 a.m. at the Rhode Island Convention Center, Room 556 A/B, One Sabin Street, Providence, Rhode Island. 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 from the President and CEO of the Rhode Island Airport Corporation, Iftikhar Ahmad.

In his role, Mr. Ahmad oversees all six airports in Rhode Island, including T. F. Green International Airport. The Rhode Island Airport Corporation has an annual economic impact of $2.6B with 22,443 direct and indirect jobs. Mr. Ahmad also serves as a United States’ civil aviation expert to the North Atlantic Treaty Organization (NATO) in an advisory capacity.

Prior to Rhode Island, Mr. Ahmad served in various Director roles of several major airports, where he has coordinated approximately $5B worth of capital work in his career. This included New Orleans International Airport, where he was responsible for the additional of a new terminal.  Mr. Ahmad has also overseen major capital programs at airports in Nashville and Houston.

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


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 Wednesday, April 17, 2019 at 8:30 a.m. at The Olmsted, 3701 Frankfort Avenue, Louisville, Kentucky. A buffet breakfast will be served prior to the meeting. Ryan Barrow

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 17.


Aquila Municipal Bond Funds Continue to Avoid Puerto Rico Debt


Each of the municipal bond funds offered in the Aquila Group of Funds adheres to an investment strategy focused on investment grade bonds as a means of managing credit risk, and an intermediate average portfolio maturity as a means of managing interest rate risk. In keeping with our emphasis on high-quality holdings, the seven state-specific municipal bond funds offered by Aquila continue to have no Puerto Rico holdings.

The commonwealth of Puerto Rico has been grappling with budgetary issues since 2014, which has generated attention in the municipal bond market, and in the media as the island territory has worked toward recovery over the past several years.

In June of 2014, the Puerto Rico Governor signed the Puerto Rico Public Company Debt Enforcement and Recovery Act, which would enable public corporations (power and transportation agencies) to restructure their debt through a process similar to bankruptcy. Puerto Rico, like the states, cannot file for Chapter 9 federal bankruptcy protection. Response to the legislation was swift, and prices on certain Puerto Rico agency bonds dropped abruptly, and lawsuits were filed challenging the constitutionality of the legislation. The US District Court of Puerto Rico found the recovery act unconstitutional, followed by the US Court of Appeals for the First Circuit, and in June of 2016, the Supreme Court ruled the legislation was impermissible. The Supreme Court voted 5-2, stating that the Commonwealth was not entitled to establish its own restructuring process, which is prohibited by the Bankruptcy Code.

The Associate Press reported on February 4, 2019, that a federal judge approved a large debt restructuring deal for Puerto Rico, which involves over $17 billion worth of government bonds backed by a sales-and-use-tax. Read more “Aquila Municipal Bond Funds Continue to Avoid Puerto Rico Debt”


Final 2018 Capital Gain Distributions


Following are capital gain distributions paid on December 6, 2018.

December 6, 2018 Capital Gail Distributions                        Short-Term           Long-Term

Aquila Three Peaks Opportunity Growth  Fund                    $0.01763                $6.01221


Following are capital gain distributions paid on December 28, 2018.

December 28, 2018 Capital Gail Distributions                      Short-Term           Long-Term

Aquila Tax-Free Trust of Arizona1                                         $0.00                     $0.02566

Aquila Churchill Tax-Free Fund of Kentucky1                       $0.00                     $0.01609

1 Represents undistributed realized gains from fiscal 2018 which must be distributed in 2018 and which cannot be reduced.

Capital gains distributions for Aquila Tax-Free Trust of Arizona and Aquila Churchill Tax-Free Fund of Kentucky have a record date of December 27, 2018, an ex-date of December 28, 2018, a payable date of December 28, 2018, and a reinvestment date of December 28, 2018.

 Printable Version


Aquila Distributors LLC does not provide accounting, tax or legal advice. Shareholders should seek tax advice based upon their particular situation.

The funds listed below made no capital gain distribution for 2018.

Aquila Tax-Free Fund of Colorado

Hawaiian Tax-Free Trust

Aquila Tax-Free Trust of Oregon

Aquila Narragansett Tax-Free Income Fund (RI)

Aquila Tax-Free Fund for Utah

Aquila Three Peaks High Income Fund

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 from your financial advisor, and when you call 800-437-1020 or visit www.aquilafunds.com.


Kentucky attempts to address pension reform in special session


Kentucky Governor Matt Bevin called a special legislative session on December 17, 2018 for the review of state pension reform legislation, after the Kentucky Supreme Court overturned pension reform law passed in spring, 2018. The Governor, in describing the need for a special session, cited recent questions from bond rating agencies, and said that Kentucky’s public retirement plans require immediate attention.  During the special session, Kentucky legislators were to have considered House Bills 1 and 2. In announcing the special legislative session, Governor Bevin said “the only chance we have for those working toward retirement is to change the system going forward”.

In comments regarding the special session, Sen. Morgan McGarvey, a Louisville Democrat just elected minority floor leader, said “we all know the unfunded pension liability is a problem”. In a letter sent by M. Stephen Pitt, general counsel for Bevin, to members of the General Assembly on Tuesday, Mr. Pitt stated that the credit markets need certainty now, and “HB 1 was drafted and proposed to provide such certainty”.

On the evening of December 18, 2018, the special session was adjourned, with the explanation that there was insufficient time to consider the proposed bills.  Any further legislative action on pension reform will be taken up once the regular legislative session begins on January 8, 2019 when, it is hoped, the political will can be found to address the pension funding issues.

Earlier this year, S&P lowered Kentucky’s rating to A from A-plus while Moody’s reduced the rating to Aa3 from Aa2, with both agencies citing the rising cost of pension obligations and revenue constraints. As of December 19, 2018, the agencies had not released revised opinions on their ratings.

Meanwhile, positive economic results for Kentucky were reported in the Urban Institute’s State Tax and Economic Review for Q2 2018, published December 18, 2018.  Year-over-year (Q2 2018 vs. Q2 2017), personal income tax receipts increased by 3.7%, sales tax receipts increased by 3.4% and total State tax revenues increased by 2.9%.

We maintain our objective of managing interest rate risk and credit risk while keeping over 90% of the portfolio rated A or higher. We believe that one of the benefits of owning shares in Aquila Churchill Tax-Free Fund of Kentucky is having the resources of local portfolio management and credit analysis. We will be monitoring the progress of pension reform in the state, along with the local economic and political environment.

For specific information about Fund characteristics and performance please see the Fund Fact Sheet and Fund Holdings located on our website at www.aquilafunds.com.



The Essential Municipal Bond Market


Anthony Tanner, CFA®, Senior Vice President and Portfolio Manager, Aquila Tax-Free Trust of Arizona

Seldom in the financial landscape do investors have greater ability to support and participate in their local and state economy than through investing in municipal bonds. Municipal bonds can offer individual investors a source of income that is generally exempt from Federal and state income taxes.

The municipal bond market provides more than just an avenue for investors to earn tax-free income.   At the local level, it is a vital and core component of economic development.  Municipal bonds are the primary tool by which state and local governments implement public policy through spending on infrastructure projects, such as hospitals, schools, water and sewer systems, airports and other vital transportation projects.   Many of our region’s most visible and successful public works projects have been funded primarily through municipal bonds, including the Light Rail System, the Sky Harbor Airport expansion, and Arizona State University campus development.

In Arizona, our residents benefit from a dynamic and resilient local municipal bond market, as illustrated by the manner in which state and local governments weathered the great recession in 2007-2009. By the low point in that economic downturn, the Arizona economy had shed nearly 300,000 jobs as employment declined 11%, compared to 6% nationally.   Nevada was the only state with a deeper decline.  Throughout that time, Arizona’s credit rating declined minimally from an average of AA- to A+.

Arizona set a recent record for employment after surpassing its pre-recession peak in 2016, and its current credit ratings of AA by S&P and Aa2 by Moody’s1 are actually higher than prior to the outset of the recession. Read more “The Essential Municipal Bond Market”


S&P Evaluates Kentucky Turnpike Authority’s Obligations


S&P Global Ratings recently lowered their rating on the Kentucky Turnpike Authority’s economic development road revenue bonds to A- from AA- , and assigned a stable outlook. The bonds maintain their ratings of A+, and Aa3, with Fitch Ratings and Moody’s, respectively. According to S&P, reasoning behind the downgrade is related to their change in issuer credit ratings methodology that was effective in January, 2018, as well as increasing financial pressure; primarily, the Turnpike Authority’s obligation to fund pension contributions for the State Police Retirement System.Kentucky Road and Bridge

The Kentucky Turnpike Authority (KTA) has $1.2 billion of outstanding revenue and refunding bonds, and unlike turnpikes in other states, the debt is not backed by toll revenue. The debt is secured by tax and fee revenue, and payments are subject to legislative appropriation under a lease structure with the State Transportation Cabinet.

In the past, S&P viewed funds from taxes, fees and other turnpike revenue as a dedicated revenue stream for bond payments, but under their revised criteria for credit ratings linked to an obligor’s creditworthiness, they no longer consider these funds to be legally dedicated to bond payments, but rather a general fund revenue source tied to unfunded pension liabilities. Without a dedicated revenue stream for bond payments, S&P’s rating of KTA’s bonds will be linked to the state’s creditworthiness. They will be rated one notch below, and move in tandem with, Kentucky’s issuer credit rating.
Read more “S&P Evaluates Kentucky Turnpike Authority’s Obligations”


2018 Aquila Tax-Free Trust of Arizona annual shareholder meetings


Updated 10/30/18: Shareholders of Aquila Tax-Free Trust of Arizona are cordially invited to attend their Annual Shareholder Meeting on Wednesday, October 31, 2018 at 9:30 a.m. at the J.W. Marriott Scottsdale Camelback Inn Resort & Spa, Salons C-E, 5402 E. Lincoln Drive in Scottsdale, Arizona. Breakfast will be served prior to the meeting.

Those unable to attend the Scottsdale meeting may be interested in attending a special informational outreach meeting in Tucson at 10:00 a.m. on Tuesday, October 30, 2018. That meeting will take place at the Westin La Paloma, Aster Room, 3800 E. Sunrise Drive. A light breakfast will be served prior to the outreach meeting.

Mark Swenson

Attendees at both meetings will have the opportunity to visit with Fund Executives, Trustees and the Portfolio Managers.

Special guest speaker at the shareholder meeting in Scottsdale will be Arizona Deputy State Treasurer Mark Swenson. Mr. Swenson has held senior executive positions for elected officials in state government for 24 years including four State Treasurers, three Senate Presidents, and five Senate Majority Leaders. Prior to the Treasurer’s office, he served for more than 12 years as a Senior Policy Advisor at the Arizona State Senate, including four years in budget and tax policy.

The Phoenix Business Journal, on October 29, 2018,  published market observations from Aquila Tax-Free Trust of Arizona portfolio manager, Tony Tanner:  My View, Arizona continues to benefit from municipal bonds. In the opinion piece, Mr. Tanner discussed the ability of investors in Arizona municipal bonds to support and participate in their local and state economies, and in visible and successful public works projects which have been funded primarily through municipal bonds.

“When Arizona investors consider the high quality and demonstrated strength of the Arizona municipal bond market, these characteristics can provide them with added confidence in making municipal bond investments that are essential to furthering the economy and quality of life in Arizona”, Mr. Tanner said.

Please plan to attend a meeting. We look forward to seeing you in either Scottsdale or Tucson.


2018 Aquila Tax-Free Fund For Utah Annual Shareholder Meeting



Shareholders of Aquila Tax-Free Fund For Utah are cordially invited to attend their annual shareholder meeting Thursday, October 25, 2018 at 8:30 a.m. at the Grand America Hotel in the Imperial Ballroom A and Reception Room A, 555 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 Managers and hear Utah State Senator and former Trustee, Lyle Hillyard speak about the Utah economy.

Mr. Hillyard has been a member of the Utah State Senate since 1985 and has practiced law in the state for over 40 years. He has served as the Senate Majority Leader and President of the Utah Senate. Through his illustrious career he has received many awards and recognitions including the Cache Chamber of Commerce Total Citizen of the Year Award in 1996 and the Distinguished Legislator Award from the Utah Trial Lawyers Association in 2003.

We look forward to seeing you in Salt Lake City.