PACE - Financial Policies - Post Issuance Compliance

POST ISSUANCE COMPLIANCE

  1. PURPOSE - This policy is intended to guide the City in meeting its obligations under applicable statutes, regulations, and documentation associated with publicly offered and privately placed securities of the City. This policy addresses the obligations of the City that arise and will continue following the issuance of securities. The City maintains a separate Debt Policy with respect to matters related to the issuance of security obligations.
  2. SCOPE - This policy outlines the obligations that may apply to each issue of securities and monitoring compliance the Finance Director is responsible for ensuring. The Finance Director may delegate responsibility to employees or outside agents.
  3. POLICY - It is the policy of the City of Camas to comply with disclosure obligations related to securities issuance. These obligations may arise because of federal tax law (with respect to tax-exempt securities) and securities laws (with respect to ongoing disclosure) or because of contractual commitments made by the City.
  4. PRACTICE

 

  • Transcripts

The City’s bond counsel shall provide the City with two copies of a full transcript related to the issuance of securities (for each issue). The transcript shall be delivered in the following form: one hard copy and one electronic and transcripts shall be delivered to the City within three months following the date of the issuance of securities. It is expected the transcript will include a full record of the proceedings related to the issuance of securities, including proof of filing an 8038-GC, if applicable.

  • Federal Tax Law Requirements (Applicable only if the securities are issued as “tax-exempt” securities)

Use of Proceeds – If the project(s) to be financed with the proceeds of the securities will be funded with multiple sources of funds, the City will adopt an accounting method that:

  1. Maintains each source of funding separately and monitors the actual expenditure of proceeds of the securities.
  2. Commingles the proceeds and monitors the expenditures on a first in, first out basis; or
  3. Supports the expenditure of funds received from multiple sources on a proportionate basis.

The Finance department will keep records of expenditure of the proceeds of the securities. Records of investments and interest earnings on the proceeds of the securities will be kept by Finance. Such records should include the amount of each investment, the date of each investment is made, the date each investment matures and if sold prior to maturity, its sale date, and its interest rate and/or yield. Interest earnings on proceeds will be deposited in the fund in which the proceeds of the securities were deposited. Records of interest earnings on reserve funds will be maintained for the securities as well.

  • Arbitrage Rebate

The Finance Director or designee will monitor compliance with the arbitrage rebate obligations of the City for each issue of securities which are described in further detail in the tax certificate if any, executed by the City for each issue and included in the transcript for the issue. If the City did not execute a tax certificate in connection with an issue, the Finance Director should consult with the City’s bond counsel about arbitrage rebate requirements.

If staff determines that the total principal amount of tax-exempt governmental obligations (including all tax-exempt leases, etc.) of the City issued by or on behalf of the City  during the calendar year, including the issue will not be greater than $5,000,000, Finance will not be required to monitor arbitrage rebate compliance for the issue, except to monitor expenditures and the use of proceeds after completion of the project. Tax-exempt governmental obligations issued to currently refund a prior tax-exempt governmental obligation will only be considered to the extent they exceed the outstanding amount of refunded bonds.

If Finance determines that the total principal amount of tax-exempt governmental obligations (including all tax-exempt leases, etc.) of the City issued or incurred any calendar year is greater than $5,000,000, Finance or an outside agent will monitor rebate compliance for each issue of tax-exempt governmental obligations issued during that calendar year.

  • Rebate Exemptions  The Finance Director will review the tax certificate, if any, in the transcript to determine whether the City is expected to comply with a spending exemption that would permit the City  to avoid having to pay an arbitrage rebate. If the tax certificate identifies this spending exemption (referred to as the six month exception, 18 month exception or the 2-year exception), then the Finance Director or an outside agent will monitor the records of expenditures to determine whether the City met the spending exemption (and thereby avoid having to pay any arbitrage rebate to the federal government). If the City did not execute a tax certificate in connection with an issue, the Finance Director should consult with bond counsel about the potential applicability of spending exceptions.
  • Rebate Compliance  If the City does not meet or does not expect to meet any of the spending exceptions described above, the City or an outside agent will:
  1. Review the investment earnings records kept as described above. If the investment earnings records clearly and definitively demonstrate that the rate of return on investments of all proceeds of the issue were lower than the yield on the issue (see the tax certificate in the transcript), then the City may opt not to follow the steps described below.
  2. Retain the services of an arbitrage rebate consultant to calculate any potential arbitrage rebate liability. The rebate consultant shall be selected no later than the completion of the project to be financed with the proceeds of the issue. A rebate consultant may be selected on an issue-by-issue basis or all securities issues of the City. The rebate consultant shall provide a written report to the City with respect to the issue and to any arbitrage rebate owed if any.
  3. Based on the rebate consultant’s report, the City will file reports and make any required payments to the Internal Revenue Service, no later than the fifth anniversary of the date of each issue (plus 60 days) and every five years thereafter, with the final installment due no later than 60 days following the retirement of the last obligation of the issue.
  • Yield Reduction Payments  If the City fails to expend all amounts required to be spend as close to any temporary period specified in the Tax Certificate (generally three years for proceeds of a new money issue and thirteen months for amounts held in a debt service fund), the City will follow the procedures described about to determine and pay any required yield reduction payment.

Unused Proceeds Following the Completion of the Project

Following the completion of the project(s) financed with the issue proceeds, the Finance Director or designee will:

  1. Review the expenditure records to determine whether the proceeds have been allocated to the project(s) intended and if any questions arise, consult with bond counsel to decide the method of reallocation of proceeds; and
  2. Direct the use of remaining unspent proceeds per the limitations set forth in the authorizing proceedings (i.e., bond ordinance) and if no provision is otherwise made for the use of unspent proceeds, to the redemption or defeasance of outstanding securities of the issue

If the Finance Director or designee finds private use of tax-exempt debt financed facilities, the Finance Director or designee will consult the City’s bond counsel to determine whether private use will adversely affect the tax-exempt status of the issue and if so, what remedial action is appropriate. Private use may be given to those facilities (or portion of those facilities) that were funded from sources other than bond proceeds. If the City determines that it is appropriate to complete a final allocation and accounting certification with respect to the expenditure of bond proceeds, pursuant to Treasury Regulations, the City will complete the allocation not later than the Final Allocation Date. The City may also elect to follow remedial action procedures available under Treasury Regulations, e.g., distribute sales proceeds to other qualified capital expenditures. The City will verify as part of year-end processes that the financed projects do not have impermissible private use.

  • Records Retention   

Records with respect to matters described below will be kept by the City for the life of the securities issue (and any issue that refunds the securities issue) and for a period of three years thereafter. Records to be retained:

  1. The transcript.
  2. Arbitrage rebate reports.
  3. Work papers that were provided to the rebate consultants.
  4. Reports of expenditures and investment receipts (showing timing of expenditure and object code of the expenditure and in the case of investment, timing of receipt of interest earnings). Maintenance of underlying invoices will be kept in the City’s content management system.
  5. Copies of all certificates and returns files with the IRS (e.g., for payment of arbitrage rebate); and
  6. Copies of all leases, user agreements for use of the financed property (agreements that support use of the property for periods longer than 30 days), and whether use was within the four walls (e.g., use of the roof of the facility for a cell phone tower).
  • Ongoing Disclosure 

Under the provisions of SEC Rule 15c2-12(the “Rule”), underwriters must obtain an agreement for ongoing disclosures in connection with the public offering of securities. Unless the City is exempt from compliance with the Rule because of certain permitted exemptions, the transcript for each issue will include an undertaking by the City to comply with the Rule. The Finance Director will monitor compliance by the City with its undertaking and may use a consultant to help with the filing and monitoring. These undertakings may include the requirement for an annual filing of operating and financial information and will include a requirement to file notices of listed “material events.”  For some types of material events (early bond calls), the State’s fiscal agent has undertaken the responsibility of filing notice of the applicable material event.

  • Other Notice Requirements

In some instances, the proceedings authorizing the issuance of securities will require the City to file information periodically with other parties, e.g., bond issuers, banks, and rating agencies. The types of information required to be filed may include budgets, annual financial reports, issuance of additional debt obligations, and amendments to financing documents. The Finance Director will be responsible for ensuring compliance with requirements.

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