Williamson County Commissioners Court banned the use of capital appreciation bonds Nov. 12 in order to protect its bond ratings.
Commissioner Cynthia Long said that following the passing of two bond packages totaling $315 million—which were not CABs—on Nov. 5, it was the responsibility of the commissioners court to ensure the county maintains its AAA bond ratings from both Standard & Poor and Fitch Ratings bond agencies.
"Williamson County sells general obligation bonds or certificates of obligation," said County Public Information Officer Connie Watson. "Most have a 20-year term where the life of the asset exceeds the term of the debt. With a CAB, the life of the debt can exceed the life of the asset."
The primary feature of CABs is that both interest and principal payments are deferred until bond maturity, according to Fitch Ratings website.
