Revenue Shortfall Assistance Through the Municipal Liquidity Facility

As revenue reports and estimates for state, county, and city governments continue to be announced, the numbers continue to be very bleak. Over the past few blog posts and in our recent webinar, we have discussed some of the funds that have been appropriated to assist local governments in their response costs to COVID-19. Today, we touch on a resource that has been made available to assist local governments in addressing revenue shortfalls.

As the economic ramifications of the pandemic became clearer over the past two months, different components of the federal government began to act. Following the passing of the CARES Act, the Federal Reserve began making funds available to help cash-strapped organizations manage and prevent further economic consequences.

$500 billion in funds through the Municipal Liquidity Facility (MLF) was announced to help state and local governments manage their cash flow during the crisis. The program was initially announced in early April and updated guidance was released on April 27^th. Given that the municipal bond market is valued at nearly $4 trillion, this program dedicates a large amount to support the market’s needs during the difficult times we are in.

Eligibility & Program Information

Who can utilize this program?
Lending support is provided to all states, cities with a population of over 250,000 residents, and counties with over 500,000 (For smaller communities, see below). These entities are referred to as Eligible Issuers. Initially, the populations were much higher when the program was initially announced (cities with at least one million residents and counties with at least two million) but has since been modified.

What if my community doesn’t meet the population threshold?
The program allows state, city, or county governments to utilize the program to support “political subdivisions and other governmental entities of the relevant state, city, or county.” For example, a state will be allowed to support local governments such as cities or counties if they choose to. However, only eligible issues can directly participate with the Federal Reserve. Should you be from a non-eligible issuer community, you must contact the relevant government that you are a political subdivision of.

What type of purchases are supported by the MLF?
Tax Anticipation Notes (TANs), Tax and Revenue Anticipation Notes (TRANs), Bond Anticipation Notes (BANs), and similar short-term notes from Eligible Issuers are eligible for the program.

When can my local government apply?
The Federal Reserve is preparing the program at this moment to make it operational. Information about the application process will be uploaded under their Frequently Asked Questions page. Additionally, to sign up for email updates on this program, visit here. Should you be from a non-Eligible Issuer community, you must contact the relevant government that you are a political subdivision of.

When does the program end?
As it currently stands, the MLF will only purchase Eligible Notes through December 31, 2020.

Helpful Resources

The following links provides greater detail about the program and can guide you to answers on additional resources for questions: Municipal Liquidity Fund, Press Release, Term Sheet, and FAQs.

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