What is an Advanced Refunding?
/An advanced refunding for a general obligation bond occurs when refunding bonds are issued more than 90 days prior to the first optional redemption date of the refunded bonds. When school and community college districts refinance general obligation bonds on an advanced basis, proceeds from the refunding bonds are invested in an escrow account until the bonds can be called. Typically districts will receive less in interest earnings from the funds held in escrow than the cost of the interest coming due on the refunding bonds. The amount of debt service savings lost due to the difference in interest earned in the escrow account and the interest on the refunding bonds is referred to as negative arbitrage.
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