Conduit Issuer of Bonds
TRVDA issues bonds on behalf of a variety of entities. The interest rate on these bonds assists the borrower by reducing the overall interest cost of the project. The relationship between the borrower and the lender remains virtually the same. TRVDA acts as a conduit or middleman between the two. Since TRVDA is a unit of government, the transaction is eligible for tax-exempt interest. Interest earned by the lender is free from federal and state income tax. Hence the term tax-free bond. The lender is then able to provide an interest rate to the borrower that is much less than a conventional taxable transaction. Historically, this rate has been 100 to 300 basis points lower to the borrower.