Bill: Neualtenburg Bonds 2

Summary

This bill seeks to define the nature of the Neualtenburg Bond, to ensure its worth, return on investment, and cost to the city. If accepted, the changes would be retroactive for existing bonds. Changes include a fixed duration and return, well-defined methods for converting investments to land-use fees, and guarantees in the event of dissolution.


Agenda

The following items require discussion and a vote:

1. Future city fund raising will be done through Neualtenburg Bonds as described below. The par-value-to-nominal ratio, the maturity date, and the rate type can be determined at the time of issue.
   
2. The currency of issued bonds will set to match the nature of the debt. For instance, a simulator purchase (US$1200) will be issued in US$ and a construction project (say L$30,000) will be issued in L$. The goal is to keep the exchange rate from affecting the rate of the bond.
   
3. Existing debt will be converted to Neualtenburg bonds retroactively, for all investors that agree to the conversion. (Ulrika agrees and encourages that you OK the conversion of at least her investment to bonds as part of the trial.)

If existing debt is converted to Neualtenburg bonds:

1. The RA will need to set a maturity date when the city will have to pay off the debt. If the city doesn't have the money to pay the bonds off, the city will have to issue a second set of bonds to cover the debt. The current loans were made on approximately 1 Apr 2005. (This is not a pyramid scheme. This is how real cities do it in the real world. Please ask questions now on this if you don't understand. )
   
2. The RA will need to set a par-value-to-nominal ratio. Please take into account the amount of perceived risk at the beginning of the project and the length of the loan (which is a function of the maturity date). Those in the RA who have invested money (if there are any) should not participate in this vote due to concerns with conflict of interest.

Neualtenburg Bonds

1. par value - This should be set according to market value and perceived quality of the bonds.
   
2. maturity date - This should be set based on projected income but should be a reasonable length of time for a virtual world (less than or equal to a year).
   
3. rate type - Bonds should return at a fixed (as opposed to variable) rate.
   
4. coupon dates - Coupon dates should be monthly and coincide with land-use fee due dates such that citizens can use their coupon to pay for land-use fees, otherwise coupons are paid to them in US$ or held in a separate account (by the city bank).
   
5. callability - Bonds will not be callable (meaning the city can not opt to pay them back early).
   
6. puttability - Bonds can not be put in the traditional sense, where a bond holder can demand early repayment from the city. Instead, there will be monthly bond put dates, where a bond holder can have up to their monthly land-use fees (minus the coupon) deducted from the issue price. This will decrease the size of the next coupon and the par value of course.
   
7. convertibility - When bonds are mature they can be transferred to other city securities (currently we have no other securities.
   
8. dissolution - In the event the cooperative ceases to exist, bond holders will be given proportional shares of government-owned land from the sim or sims that the bonds were issued to support.

Example

Ulrika buys US$300 worth of N-bonds. The par value would be US$336 with a term of six months. Coupon dates are every month, so there will be six monthly coupons of US$6. At the end of six months, Ulrika will be paid US$300.

Ulrika decides that she wants to pay for her US$30 land-use fees using her N-bond. After the first month, she receives a US$6 coupon and deducts the maximum allowed US$24 from her bond to cover the fee. Her new nominal, par value, and coupon after the partial call would be US$276, US$303.60, and US$5.52.


Calculations

Par value, P, is equal to the nominal, N, times a factor:

The factor, f, is equal to a monthly return times the number of months left until maturity, n:

The coupon, C, is equal to the the par value minus the nominal divided by the number of months left until maturity:


~Ulrika~

I'm using this thread as a temporary wiki for the Neualtenburg Bonds thread. As we make decisions in the other thread, I'll incorporate the changes into this document. That way we don't have to search for the bill to see the changes in the discussion thread.

Don't post to this thread. Instead post to this thread.

~Ulrika~

Explain to me why this is a matter for a bill to the RA, Isn't finance a Guild matter under the office of the treasurer?

I'm confused.

Anything that affects the city on a large scale must go through the RA first, including finance bills. So, the RA will ratify various items in the Bonds bill and then the Guild will have the option to veto some or all of those laws, since this topic concerns finance. When vetoing parts of the law, the Guild can suggest modifications or rewrites to the bill. The RA and AC (Guild) can go back and forth on this several times until a compromise is reached. Additionally, if the process drags on too long, the AC has the power to call emergency sessions of the RA (daily) if needed (although I'd be conservative with the use of that).

~Ulrika~

I'm just wondering, is there a policy or by-laws to the city that verifies which department controls which aspects of the government? Or is it up to one person to explain the rules as issues arise?

http://www.neualtenburg.org/government/constitution

has all the answers.

Financial matters are a matter for the Artisanal Collective (aka, "Die Guilde". However, the actual planning and passing of laws, and thus the very nature of any bonds offered, is a matter for the Representative Assembly. (The RA determines what the bonds will be, the Guild actually administrates any bond offerings.)

It is the responsibility of the Scientific Council to interpret, resolve, and explain, in a manner akin to the judicial system of the United States. (At the moment, the SC consists of myself, Ulrika, and Gwyneth.)

Also, *putting moderator hat on* it would have made a lot more sense to ask questions about the governmental workings of Neualtenburg in a seperate thread, rather than attaching it to this. I'm leaving it be for now, since while this is explained, further clarification never hurt.

Did it ever make the floor? It looks as though it didn't because the GM would have vetoed it.
I don't see it in the code, so I assume it failed to pass.

The code section is not up to date. Eventually we'll work backward to catch the previous RA's

Unstickied this thread since, really, there's no reason to keep it sticky now.