FAQ

When you invest in Durham’s municipal bonds, you’re doing more than just earning tax-advantaged interest—you’re investing directly in the Bull City’s future. Your dollars help:

• Pave and repair roads
• Build and improve parks and recreation centers
• Enhance public safety infrastructure
• Support sustainable growth and equity in underserved neighborhoods

By purchasing Durham bonds, you’re helping the Bull City fund essential projects without raising taxes all at once, spreading the cost over time while ensuring that today’s improvements benefit future generations.

It’s a way to grow your savings while giving back to the place you call home.

Additional benefits include:

• Earn tax-advantaged interest (many Durham bonds are exempt from federal and NC state income taxes).
• Receive a steady stream of interest payments.
• Invest in safe, high-quality securities (Durham typically holds a AAA credit rating, the highest possible!).

Disclaimer: The information provided on this website is for general informational purposes only and does not constitute an offer to sell or a solicitation to buy any securities, including municipal bonds issued by the City of Durham, North Carolina. Investing in municipal bonds involves risk and may not be suitable for all investors. Please consult a licensed financial advisor, tax professional, or legal counsel before making any investment decisions. The City of Durham does not endorse or recommend any specific brokerage or investment platform.

No. The City does not sell bonds directly to investors. You must purchase them through a brokerage firm or underwriter.

Primary Market

The primary market is when bonds are first issued. In this scenario, the City sells bonds to underwriters – usually banks or investment firms that agree to buy the bonds from the City and then resell them to investors – and the City receives the money from this first sale to fund public projects. There are two sale options in the primary market:

• Competitive sale: Underwriters bid against each other, and the City awards the bonds to the bid with the lowest interest cost.
• Negotiated sale: The City works directly with a chosen underwriter to set the terms and price of the bonds.

Secondary Market

After the initial sale, investors can also buy and sell Durham bonds with each other through brokerage firms in the secondary market. The City is not involved in these transactions. Prices in the secondary market may be higher or lower than the original value depending on interest rates, supply and demand, and credit quality.

When Durham issues new bonds in a negotiated sale, the City gives first priority to individual investors who live in North Carolina. The order of priority is:

1. North Carolina residents (up to $500,000 per order)
2. Individual investors nationwide
3. Group net orders - These are orders placed into a shared pool that all the banks and investment firms (called the “syndicate”) helping sell the bonds share in. The syndicate follows rules to decide how these orders are divided.
4. Member orders - These are orders placed by a single bank or investment firm directly for its own customers.

This prioritization ensures local residents have the first chance to invest before large institutions.

Steps to Buying on the Primary Market:

1. Learn about the bond sale - A document called the Preliminary Official Statement (POS) is prepared before each bond sale. It includes details on the projects being funded, the City’s financial information, and credit ratings.
2. Open or use a brokerage account - Examples include Fidelity, Charles Schwab, Vanguard, E*TRADE, TD Ameritrade
3. Place your order during the sale period - Your broker can guide you through the process.
4. Receive interest payments until the bond matures or until you sell it.

If you missed the initial sale, you can still buy Durham bonds from other investors!

Steps to Buy on the Secondary Market:

1. Understand the basics - Review the City’s Official Statement (OS) for final details about the bond, including pricing and maturity schedules. The OS can be found on the City’s BondLink website or Electronic Municipal Market Access (EMMA) website.
2. Open or use a brokerage account - Examples: Fidelity, Charles Schwab, Vanguard, E*TRADE, TD Ameritrade
3. Search for Durham bonds - Use your broker’s bond screener. You can search by issuer (“City of Durham”), by state (“North Carolina”), or by bond ID number (CUSIP).
4. Compare available bonds - Look at yield, price, maturity date, and credit rating.
5. Consider working with a financial advisor - Advisors can help you understand tax benefits, risks, and how the bonds fit into your portfolio.
6. Place your order - Decide how many bonds you want (typically sold in batches of $1,000) and confirm the price.

Key Features of municipal bonds

• Interest (coupon) rate: Fixed rate, usually paid to investors twice a year.
• Price: The amount investors are willing to pay. This can be above or below the face value, depending on market conditions.
• Yield: Your actual return, based on the price you paid and the bond’s interest payments.
• Maturity: The date when the City repays the principal (usually 1 to 30 years).
• Redemption (call) provisions: Some bonds can be paid off early by the City, usually if interest rates drop. In that case, investors receive their principal plus earned interest up to the call date.
• Credit rating: Independent rating agencies (Fitch, Moody’s, S&P) evaluate the City’s ability to repay. Durham typically has a AAA rating.

What does it mean when a bond is tax-exempt?

A bond is tax-exempt when the interest you earn is exempt from federal income tax and usually from North Carolina income tax as well. Not all bonds are tax-exempt, so check the “Tax Matters” section of the Preliminary Official Statement (POS) or Official Statement (OS). These are available from the City’s Treasury Division (TreasuryDiv@DurhamNC.gov) and on the EMMA (Electronic Municipal Market Access) website.

What does it mean when a bond is taxable?

A bond is taxable when the interest you earn is subject to federal income tax. The City issues taxable bonds when a project does not meet federal rules for tax exemption.

What are the risks of investing in municipal bonds?

• Credit risk: The chance the issuer cannot make payments. (Durham’s AAA rating makes this risk very low.)
• Interest rate risk: Bond prices go down when interest rates rise and go up when rates fall. If you hold your bond until maturity, this risk doesn’t matter as much.
• Market risk: If you sell early, the price may be higher or lower than what you paid.

What if I want to sell my bonds before maturity?

You can sell your bonds at any time through a brokerage firm. The price you receive will depend on interest rates, market demand, credit quality, and other factors. You may receive more or less than your original investment.

How can I get a bond’s Official Statement?

Official Statements (OS) are available:

• On the City’s BondLink website
• On the EMMA (Electronic Municipal Market Access) website

Bond Terminology

Bond – A loan you make to the City. In return, the City agrees to pay you back the money with interest.

Broker/Brokerage Firm – A company or person that helps you buy and sell investments like bonds. You need a brokerage account to purchase Durham bonds.

CUSIP – A unique identifier assigned to each bond. Investors can use a CUSIP number to search for specific bonds on brokerage platforms or EMMA.

Coupon/Interest Rate – The regular interest payments the City makes to investors who hold the bond.

Electronic Municipal Market Access (EMMA) – An online database run by the Municipal Securities Rulemaking Board (MSRB) where investors can find the City’s Official Statements (OS) and ongoing financial disclosures. EMMA is the official source for municipal bond information and can be accessed at emma.msrb.org.

Face/Par Value – The original value of the bond, also called principal.

Group Net Orders – Orders placed in a common pool that all underwriters in the syndicate share.

Member Orders – Orders a specific underwriter places directly for its own customers.

Maturity Date – The date when the City must repay the full original value of the bond.

Municipal Bond – A way for the City to borrow money to pay for public projects like roads, parks, or public safety facilities. When you buy a bond, you are lending money to the City.

Official Statement (OS) – A legal document prepared by the City (with its finance team, bond counsel, and underwriters) that gives investors all the key details about a bond sale. It includes information on the City’s finances, projects being funded, credit ratings, interest rates, and maturity dates. A Preliminary Official Statement (POS) is released before the sale, and the final OS is published once the bond terms are set.

Primary Market – The first time bonds are sold by the City (through underwriters). The City receives the money raised in this sale.

Redemption/Call Provisions – Some bonds include rules that allow the City to pay off all or part of the bond early, before the maturity date. This usually happens if interest rates drop and the City can borrow more cheaply. If a bond is called, the investor receives the principal plus any interest earned up to the call date, but not the interest that would have accrued afterward. Bonds with redemption provisions often offer slightly higher yields to compensate for the chance they might be called early.

Secondary Market – Where bonds are bought and sold between investors after the initial sale. The City is not involved in these trades.

Syndicate – A group of underwriters and dealers that work together to sell the City’s bonds to investors.

Syndicate Rules – The guidelines that tell underwriters how to fairly share sales and decide how bond orders are filled.

Tax-Exempt Bond – A bond where the interest you earn as an investor is generally exempt from federal income tax and usually North Carolina state income tax. Most City of Durham bonds are tax-exempt.

Taxable Bond – A bond where the interest you earn as an investor is subject to federal income tax (and possibly state tax). The City issues taxable bonds for projects that do not meet federal tax exemption rules.

Underwriter – A bank or investment firm that buys bonds directly from the City when they are first issued, then resells them to investors.

Yield – The actual return you earn on a bond as an investor, taking into account the price you paid and the bond’s interest payments. Yield may be higher or lower than the coupon rate depending on market conditions.