1. MoASBO Spring Conference
Continuing Disclosure Lorenzo Boyd Martin Ghafoori Dr. Dennis Lea Brittany Pullen Dr. Bill rebore April 25, 2012
MoASBO Spring Conference

2. Municipal Securities Rulemaking Board (“MSRB”)
Rulemaking Authority
Created and Operates “EMMA” – Electronic Municipal Market Access
MSRB is a Regulator
MSRB
ISSUER
BONDHOLDER
EMMA
SEC

3. Rule 15c2-12 (the “Rule”)
Continuing Disclosure Obligation added to Rule in July 1995
Requires Contractual Undertaking by Issuer to File Annual Reports and Material Event Notices

4. Recent SEC Legislative Changes
Decertified the Nationally Recognized Municipal Securities Information Repository (“NRMSIR”) System – Created EMMA
Elevated Importance – Office of Municipal Securities

5. Recent SEC Legislative Changes
Expanded Requirements of the Rule
Updated Material Events that Require Filing
The Board shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds (“Material Events”):
(1) principal and interest payment delinquencies;
(2) non-payment related defaults, if material;
(3) unscheduled draws on debt service reserves reflecting financial difficulties;
(4) unscheduled draws on credit enhancements reflecting financial difficulties;
(5) substitution of credit or liquidity providers, or their failure to perform;
(6) adverse tax opinions; the issuance by the Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds;
(7) modifications to rights of bondholders, if material;
(8) bond calls, if material, and tender offers;
(9) defeasances;
(10) release, substitution or sale of property securing repayment of the Bonds, if material;
(11) rating changes;
(12) bankruptcy, insolvency, receivership or similar event of the Board or the District;
(13) the consummation of a merger, consolidation, or acquisition involving the Board or the District or the sale of all or substantially all of the assets of the Board or the District, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and
(14) appointment of a successor or additional trustee or the change of name of the trustee, if material.

6. Recent SEC Legislative Changes
Event Notice for Bonds:
Issued on or after December 1, 2010 – within 10 Days after Occurrence
Issued before December 1, 2010 – filed in a “Timely Manner”

7. What Information is Needed?
Can Vary by Bond Issue
Outlined in Continuing Disclosure Section of Official Statement
Typically – FY Audit, Enrollment Data, Indebtedness of the District, History of AV and Tax Rate Information
Gather Information, Prepare and Post to EMMA

8. Who Prepares and Submits the Data?
Can be:
Issuer (Supt., CFO or Designated Representative)
Dissemination Agent (Paying Agent)
Some Bond Counsels
District will still need to Gather Information and Prepare the Document
Dissemination Agent and Bond Counsels Post for a Fee

9. When Do I Submit the Data?
File Audit and Operating Data within 180 Days of Fiscal Year End
Material Events – New Issues – 10 Business Days after Occurrence of Event

10. How Do I Submit Information to EMMA?
EMMA Registration –

11. Continuing Disclosure Submissions
Walkthrough via YouTube:
Questions about Registration or Submissions?

12. Critical Challenges for Issuers with 15c2-12
Event Notice Filing Window
Within 10 Days – Difficult for Compliance
Written Procedures in Place?
Documents retained over life of Bonds
Filing Receipts also must be retained
Are all Continuing Disclosure Covenants Met?
Audit plus Operating Data

13. Recommendations for Compliance
Adopt Written Disclosure Policies/Procedures
Formally or Informally
Include Primary and Secondary Contacts
Establish the Disclosure Requirements
From Bond Documents
Establish “Effective Date”
Calendar Reminders for Submission

14. MoASBO Spring Conference
Post-issuance compliance: Becoming accountable to the irs Presented by: Gilmore & Bell, P.C. Sean Flynn April 25, 2012
MoASBO Spring Conference

15. Post-Issuance Requirements
District must be able to answer (4) questions:
(1) How does the District monitor its ongoing federal tax law requirements?
Adopt and implement Written Post-Issuance Compliance Procedures
(2) How does the District account for the investment of Bond proceeds?
Complete Arbitrage Rebate Calculations

16. Post-Issuance Requirements
(3) How does the District account for the expenditure of Bond proceeds?
Complete a “Final Written Allocation”
(4) How does the District account for the use of Bond financed assets?
Complete “Annual Compliance Checklist”

17. Who is asking? Internal Revenue Service Bond Counsel
Compliance Check Questionnaire
Traditional tax audit or examination
Bond Counsel
Future refinancings

18. Written Compliance Procedures
Purpose:
Identify person responsible for compliance
Identify proper records the District needs to maintain to “prove” that it is in compliance
Establish process to identify potential non-compliance and remediate non-compliance

19. Written Compliance Procedures
Are written procedures required?
Internal Revenue Code
IRS Article
Form 8038-G
IRS Examinations

20. Written Compliance Procedures
Written Compliance Procedures should include:
Due diligence review at regular intervals;
Identity of person responsible for compliance;
Training of responsible official/employee;
Retention of adequate records to substantiate compliance;
Procedures reasonably expected to timely identify noncompliance; and
Procedures ensuring that the District will take steps to timely correct any noncompliance

21. Investment of Bond Proceeds
District must pay or “rebate” any excess earnings on the investment of bond related funds
Complete arbitrage rebate calculation
Calculation needed? See tax documents
Timing:
Within 5 years of the issue date (every 5 years thereafter); and
Final maturity or redemption of the bonds

22. Expenditure of Bond Proceeds
District must spend Bond proceeds in a timely manner and on “good costs”
Timely expenditure of Bond proceeds
85% within 3 years; 5 year limit?
Expenditures for “good costs”
Capital expenditures (e.g. hard costs – construct building or purchase equipment) vs Working Capital Expenditures

23. Expenditure of Bond proceeds (cont.)
How does the District track the expenditure of Bond proceeds and prove compliance?
Complete “Final Written Allocation” for each Bond issue

24. Expenditure of Bond proceeds (cont.)
Final Written Allocation
New Money vs Refunding?
When should the Final Written Allocation be completed?
Segregated Account vs. Commingled Account?

25. Expenditure of Bond proceeds (cont.)
Final Written Allocation should include the following:
Reconciliation of Total Sources to Total Uses for the Project
Sources include bond proceeds (plus investment earnings) and other District funds
Must include District’s accounting records
% of Project financed with the Bond proceeds
Date Project is placed-in-service
Estimated economic useful life of the Project

26. Use of Bond financed property
Code limits the amount of Bond financed property that may be used in a “bad use”
Bad Use?
Use by nongovernmental entities in trade or business
Type of contractual arrangements that may result in “bad use”
Sale or lease
Management/Operating Agreement
Output Contracts
Research Agreements
Any other arrangement that grant special legal entitlements to Bond financed property

27. Use of Bond financed property (cont.)
How does the District monitor the use of Bond financed property?
Complete Annual Compliance Checklist
Influenced by type of property financed
Purpose:
Provide contemporaneous records that District is in compliance;
Identify potential non-compliance on a timely basis;
Serve as reminder for other post-issuance compliance responsibilities

28. Questions?