20% cushion rule

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20% cushion rule

Guideline that revenues from facilities financed by municipal bonds should exceed the operating budget plus maintenance costs and debt service by at least 20% to allow for unforeseen expenses.

20% Cushion Rule

A rule of thumb for municipal bonds. Under the rule, the revenue a municipal bond raises should exceed the proposed budget of the project the bond intends to fund by at least 20%. This allows the bond to account for unforeseen expenses. Following a cushion rule is especially important because municipal bonds are ultimately financed by taxpayer money.
References in periodicals archive ?
The IRS has indicated that when a project contains relatively few units, it is concerned that the 20% rule will not produce a sufficiently accurate estimate of the remaining units' overall compliance with habitability or low-income requirements.
The legal ruling concluded that the three-factor formula should continue to apply for purposes of the 20% rule even though the apportionment factor rules changed to a double-weighted sales factor.
In determining the sales factor for the 20% rule, should the cost-of-performance rules apply or the market-based-sourcing rules?
Because the cost-of-performance rules were repealed, it would seem that California will require the market-based-sourcing rules in calculating the 20% rule for years beginning on or after Jan.