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Home My WebLink AboutCOM 0095.002 1998-2000 • This pocket guide has beer prepared by the . National League of Cities; i .� National ■ • Questions t Ask Association of Counties; the National Association of State Auditors, Comptrollers, F Treasurers; and the Government Before Finance Of ance Officeicers Association with input from the Securities and Exchange Commission. Copies of this pocket guide are available from the state and local organizations listed You Approve above and from: ' , • Airports Council International - North America = • American Association of Port Authorities A Bond Issue • • American Bankers Association S • American Public Power Association 1 - ' • American Public Works Association - - r r : _ • A Finance Agencies i , • Association of Local Housing 4 _ r - =` Association m I. • Association of Metropolitan Sewerage Agencies - '.?' ', ., :k ' • Association of School Business Officials International _ 7 'a_=_ - - "L i 'tom : -- • • Council of Development Finance Agencies - _ c..- " - ' °`,-" V • • Council of Infrastructure Financing Authorities \IIIIII - • x • International City/County Management - Association _,s ° -,•''� �- • International Municipal Lawyers Association - - - . - ;=%; _ - r.e '''-' _. • Municipal Treasurers' Association . -.:'''-(44 - - = ^ - a ., • National Association of Higher Educational 5 � °"' 'a s' �'' -' • Facilities Authorities /� A� .' • National Association of State Treasurers ' *zY APP �� - �._ • National Conference of State Legislatures • � : �, - D • National Council of Health Facilities ,.; " - -" _ "' Finance Authorities f _ ; . ` _ 1 �` } : • National Council of State Housing Agencies • National Federation of Municipal Analysts , • National School Boards Association A POCKET GUIDE FOR • Public Housing Authorities Directors Association ELECTED AND OTHER • PSA The Bond Market Trade Association PUBLIC OFFICIALS RECEIVED December 1996 Tme-- -- -_ -- - _ `- 9 9 B • —• ---• — 1 — . Gounly Councl_I-a• • Dorn Ne. 9s a L File No. se „ : . a i i. iw Pres c ou& ct-t Rat. Date TAN 6 1899 ABOUT THIS EQOKLET THEQ3ASICS This pocket guide is designed to assist state State and local governments have a duty and local officials in ensuring that their bond under federal securities laws to produce disclosure documents comply with federal bond disclosure documents that do not con - securities laws. It includes questions that are tain misstatements or omissions of "materi- intended to produce disclosure documents al" facts. A fact is material "if there is a sub - that meet the needs of a reasonable investor stantial likelihood that a reasonable investor purchasing a jurisdiction's bonds or notes. would consider it important in deciding whether to buy or sell bonds." Failure to These questions do not set standards. They meet these requirements could result in a are designed to assist state and local offi- Securities and Exchange Commission cials in the establishment of procedures that enforcement action or private litigation. promote good disclosure. No brief list of questions can cover every issue that may be State and local officials, therefore, should important for a particular issue. have a thorough understanding of a pro- ' posed bond issue prior to its approval and Financial concerns confronting one unit of ensure that all significant information is pro- , tt government may be dramatically different vided to potential bondholders. An appro- from those confronting another. priate examination of a bond issue should This pocket guide is divided into two sec- begin by asking the following questions: tions. The first contains general questions - Why are the bonds being issued? to ask yourself and your staff. Officials should be sure that their staff have an ade- ✓ What is the purpose of the issue and quate understanding of'the issues presented how will the bond proceeds be used? by these questions. ✓ What type of bonds are being issued? The second section focuses on questions / How will the bonds be repaid? that should be directed to outside profes- sionals who have assisted in the preparation ✓ Are there circumstances that might inter - of the bond issue and related documents. fere with repayment? Outside professionals include the bond / What is our financial condition and counsel, underwriter, financial advisor, what circumstances might cause it to accountant, issuer's counsel, engineering change? firm, or other consultants. ✓ What options do bondholders have if A list is provided at the end of this docu- revenues are not sufficient to pay them? ment identifying resources on good disclo- sure practices and requirements under the federal securities laws. OQUESTIONS OFFICII S SHOULD ASK THEMSELVES AND THEIR STAFF 1 How have we allocated responsibilities Do our procedures permit the under - for the preparation of the official state- writers to carry out their "due diligence" ment? Have we clearly defined the responsi- and other responsibilities? bilities of all participants in the transaction? fully considd any questions 2 What processes or procedures have Have T asked we by the rating agen cies? been established to select qualified out- What continuing disclosure responsibili- side professionals? How are we relying on ties have we assumed and what proce- them, and is our reliance appropriate? How dures have we established to meet them? are they being compensated? Who will determine and file the annual What have we done to establish the financial and material event disclosure infor- accuracy of financial and operating mation? Have we designated an individual u information and its disclosure in the official to speak to the market on our behalf? statement? Has anything happened since the /1 If we are relying on the bond counsel, date of the financial statements that needs financial advisor, or trustee to evaluate to be disclosed? and meet our continuing disclosure require - What policies and procedures have we ments, what procedures are in place to developed to determine whether materi- keep them apprised of our financial condi- al conflicts of interest exist that need to be tion and other material information? disclosed? Have our procedures produced an 5 What procedures have we established 10 official statement that we feel accu- to accurately describe the project, the rately presents our financial condition and bond terms, the sources of repayment, and discloses the information a reasonable the risks associated with the project? What investor needs to know? Have all the right procedures have we established for the people reviewed it? investment and disbursement of the bond proceeds? QUESTIONS OC=ICIALS RESOURCE SHOULD ASK OUTSIDE • The Government Finance Officers PROFESSIONALS Association offers a number of disclo- sure products, including disclosure 1 What is the nature or scope of the writ- guidelines, a videotape on SEC Rule ten opinion or certification, if any, that 15c2 -12, and a diskette containing SEC you are giving in this transaction and relat- Orange County documents. A public ing to the disclosure document? Have we official's guide to disclosure is sched- given you access to the information you uled for publication in 1997. need? • The National Association of Bond Have you explained to us all aspects of Lawyers has disclosure publications, .. . 2 the structure or nature of this transaction including a Rule 15c2 -12 handbook, so that you are confident we fully under- a book on fundamentals of municipal , stand all critical aspects? Does our official bond law, and information on the selec- statement adequately address any concerns tion and evaluation of bond counsel. you have about this transaction that a rea- A model engagement letter is being ,u . sonable investor would consider important? prepared. 3 Are there any matters regarding your • Disclosure guidelines are available from participation in this transaction about - the Association of Local Housing which you should make us aware, including Finance Agencies, National Council of potential conflicts of interest? State Housing Agencies, National Has your review of the relevant financial Has of Health Facilities Finance Authorities, the National Federation of 4 documents and other materials, includ- Municipal Analysts and the American ing the official statement, raised any con- Bankers Association. cerns regarding this borrowing? Do these concerns need to be disclosed? • Other sources to consult are the 5 Are you aware of any circumstances in Municipal Disclosure Task Force Report of the National Association of State which we, our staff, or others have not Auditors, Comptrollers and Treasurers; complied with our procedures so that we It's 12 O'clock: Do You Know Where can make sure that our official statement { Your City's Money Is? from the adequately and accurately describes this National League of Cities; and the PSA's transaction? ( Rule 15c2 -12 Model Language. 1 t 1 i