(A resolution adopting a post bond issuance compliance policy)
WHEREAS, the City of Hood River issues bonds; and
WHEREAS, there are compliance issues that must be adhered to following the issuance of bonds; and
WHEREAS, it is desirable to have a written policy regarding post bond issuance compliance; and
WHEREAS, the City should adopt the proposed post bond issuance compliance policy.
NOW, THEREFORE, BE IT RESOLVED by the Hood River City Council that:
The City Council adopts the proposed post bond issuance compliance policy.
Approved by the Hood River City Council the 24 day of June 2013, to take effect immediately.
Arthur Babitz, Mayor
Jennifer Gray, City Recorder
CITY OF HOOD RIVER
BOND POST ISSUANCE COMPLIANCE POLICY
This policy is intended to guide the City of Hood River in meeting its obligations under applicable statutes, regulations and documentation associated with publicly offered and privately placed securities of the City of Hood River. This policy addresses obligations of the City of Hood River that arise and will continue following the issuance of securities. The City of Hood River should maintain a separate debt policy with respect to matters related to the issuance of security obligations, including compliance with the City of Hood River’s disclosure obligations related to securities issuance. These obligations may arise as a result of federal tax law (with respect to tax-exempt securities) and securities laws (with respect to ongoing disclosure) or as a result of contractual commitments made by the City of Hood River. This policy outlines obligations that may be applicable to each issue of securities and identifies the party to be responsible for monitoring compliance. In the City of Hood River, the Finance Director will be responsible for ensuring that the policy is followed and checklists and records maintained. The Finance Director may delegate responsibility to employees and outside agents for developing records, and/or maintaining records and checklists. The City of Hood River will provide educational opportunities to the Finance Director (opportunities to attend educational programs/seminars on the topic) in order to facilitate such individual’s performance with his or her obligations for post-issuance compliance.
1. The City of Hood River’s bond counsel shall provide the City of Hood River with a full CD transcript related to the issuance of securities (for each issue) shortly following the date of issuance of securities. It is expected that the transcript will include a full record of the proceedings related to the issuance of securities, including proof of filing an IRS Form 8038-G or 8038-GC, if applicable.
2. Bond transcripts will be retained by the following parties and in the following locations within the City of Hood River: The City Recorder’s Office.
B. Federal Tax Law Requirements (Applicable to all securities, whether publicly offered or privately placed, but only if the securities are issued as federally “tax-exempt” securities).
1. Use of Proceeds. The City of Hood River will use the proceeds for costs of the projects as described in the tax certificate, or similarly titled document, included in the CD transcript for the issue.
a. If the project(s) to be financed with the proceeds of the securities will be funded with multiple sources of funds, the City of Hood River will adopt an accounting methodology that:
♦ maintains each source of funding separately and monitors the actual expenditure of proceeds of the securities;
♦ commingles the proceeds and monitors the expenditures on a first in, first out basis; or
♦ provides for the expenditure of funds received from multiple sources on a proportionate basis.
b. Records of expenditures (timing of expenditure and object code) of the proceeds of securities will be maintained by the Finance Department.
c. Records of investments and interest earnings on the proceeds of securities, as well as any reserve or debt service funds or accounts maintained or the securities, will be maintained by the Finance Department. Such records should include the amount of each investment, the date 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 (if not, then the plan for use of interest earnings will be discussed with the City of Hood River’s bond counsel).
2. Arbitrage Rebate. The Finance Director of the City of Hood River (“Rebate Monitor”) will monitor compliance with the arbitrage rebate and yield restriction obligations of the City of Hood River for each issue (“issue”) of securities which are described in further detail in the tax certificate if any, executed by the City of Hood River for each issue and included in the transcript for the issue. If the City of Hood River did not execute a tax certificate in connection with an issue, the Rebate Monitor should consult with the City of Hood River’s bond counsel regarding arbitrage rebate requirements. To ensure compliance with the rebate and yield restriction requirements, the Rebate Monitor will:
a. retain the services of an arbitrage rebate consultant in order to calculate any potential arbitrage rebate or yield restriction liability with respect to each issue of tax-exempt securities, except with respect to any issue that the Rebate Monitor determines, after consultation with the City of Hood River’s bond counsel, would not require calculations in order to maintain compliance with the arbitrage rebate and yield restriction requirements.
b. provide the arbitrage rebate consultant with requested documents and information on a prompt basis, review applicable rebate reports and other calculations, and generally interact with the arbitrage rebate consultant to ensure the timely preparation of rebate reports and payment of any rebate or yield reduction payments. The rebate consultant shall provide written reports to the City of Hood River with respect to each issue of tax-exempt securities and with respect to any arbitrage rebate or yield restriction owed if any.
b. based on the advice, reports, and calculations of the rebate consultant, file reports with 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. Copies of all arbitrage rebate reports, related return filings with the IRS (i.e., IRS Form 8038-T), copies of cancelled checks with respect to any rebate payments, and information statements must be retained as described below in B.5., below.
3. Unused Proceeds Following Completion of the Project. Following completion of the project(s) financed with the issue proceeds, the Finance Director will:
a. 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 in order to determine the method of re-allocation of proceeds); and
b. direct the use of remaining unspent proceeds (in accordance with the limitations set forth in the authorizing proceedings (i.e., bond ordinance or resolution) and if no provision is otherwise made for the use of unspent proceeds, to the redemption or defeasance of outstanding securities of the issue.
4. Use of the Facilities Financed with Proceeds. In order to maintain tax-exemption of securities issued on a tax-exempt basis, the financed facilities (projects) are required to be used for governmental purposes during the life of the issue. The Finance Director of the City of Hood River will monitor the uses of such projects on an annual basis, and will maintain records regarding any private use of the projects financed with tax-exempt proceeds. The IRS Treasury Regulations prohibit private business use (use by private parties (including nonprofit organizations, the federal government, for-profit entities, and individuals acting in a trade or business)) of tax-exempt financed facilities beyond permitted de minimus amounts unless cured by a prescribed remedial action. Private use may arise as a result of:
a. Sale of the facilities;
b. Lease of the facilities (including leases, easements or use arrangements for areas outside the four walls, e.g., hosting of cell phone towers);
c. Management contracts (in which the City of Hood River authorizes a third party to operate all or any portion of a facility (e.g., cafeteria));
d. Preference arrangements (in which the City of Hood River grants a third party preference of the facilities, e.g., preference parking in a public parking lot).
If the Finance Director identifies private use of tax-exempt financed facilities, that is different from the covenants, representations or factual statements in the tax certificate for the issue, the Finance Director will promptly contact and consult with the City of Hood River’s bond counsel to ensure that there is no adverse effect on the tax-exempt status of the tax-exempt issue and, where appropriate, will remedy any violations through the “remedial action” regulations (Treas. Reg. Section 1.141-12), the Voluntary Closing Agreement Program (VCAP) described in IRS Notice 2008-31 (or successor guidance), or as otherwise prescribed by bond counsel.
5. Records Retention.
a. Records with respect to matters described in this Subsection B will be retained by the City of Hood River for the life of the securities issue (and any issue that refunds the securities issue) and for a period of three years thereafter.
b. Records to be retained:
i. Bond closing transcripts;
ii. Copies of records of investments, investment agreements, credit enhancement transactions, financial derivatives (e.g., an interest rate swap), arbitrage reports and underlying documents, including trustee statements;
iii. Copies of material documents relating to capital expenditures financed or refinanced by tax-exempt proceeds, including (without limitation) purchase orders, invoices, trustee requisitions and payment records, as well as documents relating to costs reimbursed with tax-exempt proceeds and records identifying the assets or portion of assets that are financed or refinanced with tax-exempt bond proceeds;
iv. All contracts and arrangements involving private use, or changes in use, of the tax-exempt-financed property;
v. All reports and documents relating to the allocation of tax-exempt proceeds and private use of tax-exempt-financed property; and
vi. Itemization of property financed with tax-exempt proceeds, including placed in service dates.
C. Federal Securities Law Requirements - Ongoing Disclosure. Under the provisions of SEC Rule 15c2-12 (the “Rule”), underwriters are required to obtain an agreement for ongoing disclosure in connection with the public offering of securities (i.e., the Rule does not apply to bank placements or bonds sold to the USDA). Unless the City of Hood River is exempt from compliance with the Rule as a result of certain permitted exemptions, the transcript for each publicly offered bond issue will include an undertaking by the City of Hood River to comply with the Rule. The Finance Director of the City of Hood River will monitor compliance by the City of Hood River with its undertakings. 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.”
D. Other Notice Requirements. In some instances, the proceedings authorizing the issuance of securities will require the City of Hood River to file information periodically with other parties, e.g., bond insurers, banks, rating agencies. The types of information required to be filed may include (1) budgets, (2) annual financial reports, (3) issuance of additional debt obligations, and (4) amendments to financing documents. The Finance Director of the City of Hood River will maintain a listing of those requirements and monitor compliance by the City of Hood River.