P R O M O T I N G E X C E L L E N C E I N G O V E R N M E N T

LOCAL GOVERNMENT DEBT METHODS 101

Why do Cities finance?

• Need for facilities/equipment • Consequences of delay • Spreading of costs

Historical Perspective

Debt excesses & defaults Georgia Constitutional limits What is debt subject to limitations?

• Dawson Case • Griffin Case • Augusta Case

Exceptions to debt limits: • Jonesboro Case • Rome Case • Davisboro Case • Albany Case

Types of Debt General Obligations (GOs) Referendum election requirement Full faith and credit, tax backing Limited to 10% of digest

SPLOST GO Debt Must be part of ballot question Repayable first from SPLOST, with property tax guarantee

Tax Anticipation Notes (TANs)

Must be repaid within calendar year Cannot exceed 75% of prior year or 100% of current year taxes

Types of Debt

Revenue Bonds Available for described revenue producing projects Cannot be supported by general fund

Lease-Purchase & COPs Bricks & Mortar and Equipment Annual debt service subject to 7½% limitation Subject to annual appropriation and termination 100% financing requirement Available for SPLOST projects

Authority Revenue Bonds Project qualifications vary from City to City Some authorities may issue revenue bonds for City projects Cities may contract with Authority to pay debt service Current litigation may decide what types of contracts are lawful

Redevelopment Agencies (URAs) Requires adoption of redevelopment plan URA issues revenue bonds for planned facilities Cities lease facilities from URA; rentals back the revenue bonds

Types of Debt

Getting Started….. Adoption of Reimbursement Resolution Identify a debt sale method

• Direct bank placement • Public Sale

Waive performance audits or reviews Public hearing required by URAs or Bricks & Mortar Projects Validate GO bonds, SPLOST bonds or Revenue bonds Assemble financing team

• City Attorney • Bond Counsel • Finance Director • Municipal Advisor • Investment banker

The Tax Man Cometh… Prerequisites for tax-exempt interest

• Governmental Issuer • Borrowing is legal • Information report filed with IRS • Arbitrage Considerations • Allowable purposes

Cash flow borrowing in limited circumstances Governmental facilities Only qualified private facilities

Bank-Qualified Debt

P R O M O T I N G E X C E L L E N C E I N G O V E R N M E N T

Local Government Debt Methods 101 June, 25, 2016

Kay Love, City of Roswell

Decisions, Decisions, Decisions

Does My City Have a Capital Improvement Plan (CIP)?

CIP?

YES

Refresh It

NO

Develop a CIP

Does My City Have Debt Management Policies?

Debt Policies?

YES

Review Them

NO

Develop a Policy

What Should Be In Debt Management Policies?

Goals and Objectives

Capital Planning and Financing Policies

Structural Approach to Debt Management Policy

Financial Consultants/Service Providers Policy

What Should Be In Debt Management Policies?

Marketing and Inter-Agency Relationship Policy Method of Sale Policy Short-Term Debt & Interim Financing Policy

Credit Ratings and Enhancements Policy

Refunding of City Indebtedness Policy

Referendum Strategy

Project List Project Budgets Timelines/Critical Dates/Responsibilities Ballot Question & Reimbursements Policies Public Education Plan Financing Team

The Public Wants to Know…. What projects will be included in the

project list? How will the projects benefit the city? Will property taxes or fees increase

because of the bonds? When will the city issue bonds? What is the estimated cost to borrow? Where can I get more information?

Project Benefits Example

Pine Cone Bridge Road at State Route 2 will improve safety and operations in and around this interchange. Project details may include a west bound through lane addition, a south bound right turn lane and aesthetic improvements.

Get the Ballot Question(s) Right SHALL GENERAL OBLIGATION BONDS IN THE AGGREGATE AMOUNT

OF $14,700,000.00 BE ISSUED BY PERFECT CITY, GEORGIA TO FINANCE THE COST OF ACQUISITION, DESIGN AND/OR DEVELOPMENT OF REAL AND/OR PERSONAL PROPERTY FOR TRANSPORTATION AND PUBLIC WORKS INFRASTRUCTURE IMPROVEMENT PURPOSES INCLUDING TRAFFIC MITIGATION, FACILITY DESIGN AND DEVELOPMENT, PEDESTRIAN AMENITIES, INTERSECTION IMPROVEMENTS, SIDEWALKS, MULTIUSE TRAILS AND SAFETY RELATED STREET IMPROVEMENTS; TO FINANCE THE COST OF ACQUISITION, DESIGN AND/OR DEVELOPMENT OF REAL AND/OR PERSONAL PROPERTY FOR RECREATIONAL FIELDS AND PARK FACILITIES TOGETHER WITH FURNITURE, FIXTURES AND EQUIPMENT RELATED THERETO; AND TO FINANCE THE ACQUISITION, DESIGN AND/OR DEVELOPMENT OF A FIRE STATION TOGETHER WITH FURNITURE, FIXTURES AND EQUIPMENT RELATED THERETO? YES______ NO______

Make the Projects Real

Website Information

Signage

Lessons Learned

Anticipate citizen questions & follow up Develop multiple venues for input Create key messages Determine communication tactics &

communicate, communicate, communicate Consider new/additional Operating Costs

associated with projects

Lessons Learned

Preliminary Official Statement – Own it Revise project budgets for market

conditions & project timing Have a contingency plan Provide frequent project status updates

Lessons Learned

Anticipate Project Overruns Do what you say you are going to do The best political decisions are not always

the best financial decisions Bad news does not get better with age

Lessons Learned

Make sure elected officials and staff know what they can and can’t do to promote a bond referendum. Use of External Advocacy Groups

VOTE YES

Kay Love City Administrator

City of Roswell klove@roswellgov.com

770-641-3727

Bri Joiner Manager, Regulatory Education

Municipal Securities Rulemaking Board

Topics • Role of the MSRB and EMMA®

• Putting EMMA® to Work for You

• Working with Municipal Advisors

• MSRB Resources

Role of the MSRB and EMMA®

Mission of the MSRB

• Promote a fair,

transparent and efficient municipal market • Protect investors, issuers and the public interest

How the MSRB Fulfills its Mission

Regulation

Transparency

Education and

Outreach

Meet EMMA

What’s on EMMA

Official Statements Advance Refunding Documents Event Notices Financial Disclosures 529 Plan Disclosures Municipal Asset-Backed

Securities Disclosure Political Contribution

Disclosures

Trade Prices and Yields Interest Rate Resets for

Municipal Variable Rate Securities

Credit Enhancement Documents for Variable Rate Securities

Credit Ratings New Issuance Statistics Trade Statistics Disclosure Statistics

Disclosures Data

Issuer Information on EMMA

Putting EMMA® to Work for You

How to Put EMMA to Work for You

Comply • Comply with financial disclosure obligations

Inform • Provide information to investors

Monitor • See how your bonds are trading

Continuing Disclosure Obligations

General Anti-Fraud Provisions

Specifics/ Timing for Required Disclosures

Securities Exchange Act of 1934

SEC Rule 15c2-12

SEC Rule 10b-5

Continuing Disclosure Agreements

Federal Anti-Fraud Laws • Prohibit fraudulent, inaccurate or

misleading information in disclosures to investors

• Material information may not be omitted

• Violations may result in SEC charges against issuers Fines Bans from business

Required Disclosures (SEC Rule 15c2-12)

• Comprehensive Annual Financial Report • Audited Financial Statements • Financial Information • Operating Data • Notice of Failure to File Annual Financials

Financial/ Operational

• Notices of specific events that can have an impact on key features of the bonds

• Must be submitted within 10 business days

Event Notices

Required Event Disclosures Principal and interest payment delinquencies

Non-payment related defaults

Unscheduled draws on debt service reserves reflecting financial difficulties

Unscheduled draws on credit enhancements reflecting financial difficulties

Substitution of credit or liquidity providers, or their failure to perform

Adverse tax opinions or events affecting the tax-exempt status of the security

Rating changes

Modifications to rights of security holders

Bond calls and tender offers

Defeasances Release, substitution or sale of property securing repayment of the securities

Bankruptcy, insolvency or receivership

Merger, acquisition or sale of all issuer assets

Appointment of successor trustee

Continuing Disclosure Agreements

• Issuer’s contractual obligations for: – What to disclose in annual financials – Required timing of annual financials – Events that will trigger disclosure – History of compliance with SEC Rule

15c2-12 • Often included as exhibits or appendices

in official statements • Details and requirements can vary from

issue to issue

Do you remember signing a CDA?

Submitting Required Disclosures to EMMA

Set Up an Organization Account

• Creates single continuing disclosure submission account for all agents and staff of an issuer

• Allows master account administrator to securely and independently manage staff access

• Required to use certain EMMA® tools

dataport.emma.msrb.org/AboutDataport.aspx

Sign Up for Email Reminders

• Issuers can schedule automated emails from EMMA® to be reminded of approaching annual or quarterly financial disclosure filing deadlines

• Include additional contacts to ensure all those with a role in disclosure are alerted

Click to Access Disclosure Resources

http://www.msrb.org/Education Center/Issuers/Disclosing.aspx

How to Put EMMA to Work for You

Comply • Comply with financial disclosure obligations

Inform • Provide information to investors

Monitor • See how your bonds are trading

How Investors Find Information on EMMA

Navigate by State and Type

Customize Your Issuer Homepage on EMMA

How to Put EMMA to Work for You

Comply • Comply with financial disclosure obligations

Inform • Provide information to investors

Monitor • See how your bonds are trading

View Real-Time and Historical Trade Data

Find and Compare Similar Securities

• EMMA®’s Price Discovery Tool

Export Trade Data

• Use EMMA Trade Monitor to export trade data from EMMA® to a desktop application – Analyze the prices, yield and

amount of secondary market trade activity of municipal bonds

– Support evaluation of pricing for new issues

– Access with an organization account

Muni Market Facts

Pop Quiz • What’s the average number of daily trades in municipal

bonds?

• Which state issues the largest par amount for infrastructure financing?

• How many municipal bonds are outstanding?

Working with Municipal Advisors

The Deal Team

State and Local Governments

(Taxpayers)

Municipal Advisor(s)

Deal Table

Underwriter(s)

Underwriter’s Counsel

Bond Counsel Credit Enhancer

Feasibility Consultant

Underwriting Syndicate Member

Selling Group Members

Auditor

Rating Agencies Disclosure Counsel

Trustee

Other Counsel

What to Expect from Your Municipal Advisor

CH

ECK

Verify Your Municipal Advisor’s Registration Status and Credentials

PRO

TECT

Know the Rules Designed to Protect Your Interests

REPO

RT

Call the MSRB to Report Potential Rule Violations

Verify Municipal Advisor Registration

• All municipal advisor firms should be registered with both the SEC and the MSRB

• Find a full list of MSRB-registered firms on the MSRB website

http://www.msrb.org

Look for Series 50 Credential • MSRB requires all municipal advisors to take and pass

the baseline test of professional qualification • By Fall 2017, all municipal advisor professionals should

hold the MSRB’s Series 50 credential • Ask your municipal advisor whether they have taken and

passed the exam

What to Expect from Your Municipal Advisor

CH

ECK

Verify Your Municipal Advisor’s Registration Status and Credentials

PRO

TECT

Know the Rules Designed to Protect Your Interests

REPO

RT

Call the MSRB to Report Potential Rule Violations

Municipal Advisors MUST

Provide documentation of municipal advisory relationship (e.g. contract) Disclose conflicts of interest Put municipal entity client’s interests

ahead of their own Make suitable recommendations

Municipal Advisors MUST NOT

ₓCharge excessive compensation and fees ₓAttempt to “pay-to-play” by giving

excessive gifts or gratuities to current or prospective clients ₓAdvise on certain transactions where the

municipal advisor’s firm is acting as principal

What to Expect from Your Municipal Advisor

CH

ECK

Verify Your Municipal Advisor’s Registration Status and Credentials

PRO

TECT

Know the Rules Designed to Protect Your Interests

REPO

RT

Call the MSRB to Report Potential Rule Violations

File a Complaint • Submit complaints to the MSRB

– 202-838-1330

– complaints@msrb.org

• Submit complaints to the SEC

– U.S. Securities and Exchange Commission Office of Municipal Securities 100 F Street, NE Washington, DC 20549

– Tips, Complaints and Referrals Portal

• Submit complaints about FINRA-registered municipal advisors to FINRA

– FINRA's Investor Complaint Center

MSRB Resources

Get the 411 from the Municipal Market’s 311

Call MSRB Support 202-838-1330 MSRBsupport@msrb.org Live support weekdays 7:30 a.m. - 6:30 p.m. ET

Questions about the municipal market?

Visit the MSRB Education Center

Municipal Securities Rulemaking Board 74

Access Free Educational Resources

Contact the MSRB

MSRB Online msrb.org emma.msrb.org MSRB Support 202-838-1330 MSRBsupport@msrb.org

MSRB Email Updates – Subscribe at msrb.org Follow the MSRB on Twitter @MSRB_News