530 Post Issuance ComplianceCITY OF YELM
RESOLUTION NO. 530
A RESOLUTION OF THE CITY OF YELM APPROVING THE POST
ISSUANCE COMPLIANCE POLICY SECTION AS PART OF THE CITY
OF YELM FINANCIAL POLICIES.
WHEREAS, the City Council is responsible for setting financial policy for
the City of Yelm and;
WHEREAS, the Council wished to establish sections of the policies as
they are developed and needed; and
WHEREAS, the issuance of tax - exempt bonds requires the filing of federal
form 8038 -G to ensure compliance with federal law following the issuance
of bonds and during the life of the bond; and
WHEREAS, written policies are recommended to ensure the proper
monitoring and record keeping,
NOW, THEREFORE, the City Council of the City of Yelm does resolve to
approve the written policy as shown in Attachment A; Post Issuance
Compliance Policy for Government Bonds.
Approved by the City C u cil on this 28th day of February, 2012.
Ron Hardin 4, Mayor City oQYelm
Attest: I 1
Janine Schnepf, City Clerk
Attachment A -Governmental Bonds
CITY OF YELM, WASHINGTON
POST ISSUANCE COMPLIANCE POLICY FOR GOVERNMENTAL BONDS
This policy is intended to guide the City of Yelm, Washington (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 obligations of the City
that arise and will continue following the issuance of securities. 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. 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, the City Treasurer will be
responsible for ensuring that the policy is followed and checklists and records maintained. The
City Administrator may delegate responsibility to employees and outside agents for developing
records, maintaining records and checklists. The City will provide educational opportunities
(opportunities to attend educational programs /seminars on the topic) for the parties identified in
this policy with responsibilities for post- issuance compliance in order to facilitate their
performance of these obligations.
A. Transcripts.
1. The City's bond counsel shall provide the City with three copies of a full transcript
related to the issuance of securities (for each issue). The transcript shall be delivered in the
following form: one CD and 2 hard copies and transcripts shall be delivered to the City within
two month[s] 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 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: City Clerk and City Administrator, 105 Yelm Ave W, Yelm Ave W.,
Yelm WA 98597
B. Federal Tax Law Requirements (Applicable only if the securities are issued as "tax -
exempt" securities).
Use of Proceeds.
a. 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 methodology that:
commingles the proceeds and monitors the expenditures on a first in, first
out basis.
b. Records of expenditures (timing of expenditure and object code) of the
proceeds of securities will be maintained by the City Administrator.
C. Records of investments and interest earnings on the proceeds of
securities will be maintained by the City Administrator. 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's bond counsel).
Attachment A
d. Records of interest earnings on reserve funds maintained for the
securities.
2. Arbitrage Rebate. The Treasurer of the City ( "Rebate Monitor ") will monitor
compliance with the arbitrage rebate obligations of the City for each issue ( "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 Rebate Monitor should consult with the City's bond counsel
regarding arbitrage rebate requirements. The City will provide educational opportunities
(opportunities to attend educational programs /seminars on the topic) for the Rebate Monitor in
order to facilitate his /her performance of these obligations.
a. If the Rebate Monitor 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 and subordinate entities during the calendar year, including the issue, will
not be greater than $5,000,000, plus such additional amount not in excess of $10,000,000 as is
to be spent for the construction of public school facilities, the Rebate Monitor 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 (see #3 below). For purposes of this paragraph,
tax - exempt governmental obligations issued to currently refund a prior tax - exempt governmental
obligation will only be taken into account to the extent they exceed the outstanding amount of
the refunded bonds.
b. If the Rebate Monitor 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, plus such additional amount not in
excess of $10,000,000 as is to be spent for the construction of public facilities, the Rebate
Monitor will monitor rebate compliance for each issue of tax - exempt governmental obligations
issued during that calendar year.
i. Rebate Exceptions. The Rebate Monitor will review the tax
certificate, if any, in the transcript in order to determine whether the City is expected to comply
with a spending exception that would permit the City to avoid having to pay arbitrage rebate. If
the tax certificate identifies this spending exception (referred to as the six -month exception, the
18 month exception or the 2 -year exception), then the Rebate Monitor will monitor the records of
expenditures (see B.1 above) to determine whether the City met the spending exception (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 Rebate Monitor should consult with
bond counsel regarding the potential applicability of spending exceptions.
ii. Rebate Compliance. If the City does not meet or does not expect
to meet any of the spending exceptions described in (i) above, the City will:
X. review the investment earnings records retained as
described in B.1 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 no to follow the steps
described in the following paragraph.
Y. retain the services of an arbitrage rebate consultant in
order to calculate any potential arbitrage rebate liability. The rebate consultant shall be selected
Attachment A -2-
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 for all securities issues of the
City. The Rebate Monitor will obtain the names of at least three qualified consultants and
request that the consultants submit proposals for consideration prior to being selected as the
City's rebate consultant. The selected rebate consultant shall provide a written report to the City
with respect to the issue and with respect to any arbitrage rebate owed if any.
Z. based on the report 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.
C. Yield Reduction Payments. If the City fails to expend all amounts
required to be spent as of the close of any temporary period specified in the Tax Certificate
(generally 3 years for proceeds of a new money issue and 13 months for amounts held in a debt
service fund), the City will follow the procedures described in B.2.b.ii above to determine and
pay any required yield reduction payment.
3. Unused Proceeds Following Completion of the Project. Following completion of
the project(s) financed with the issue proceeds, the Treasurer 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) 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 Treasurer of the City will
monitor and 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 and the federal government)) 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 authorizes a third party to
operate a facility (e.g., cafeteria);
d. Preference arrangements (in which the City grants a third party
preference of the facilities, e.g., preference parking in a public parking lot).
Attachment A -3-
If the Treasurer identifies private use of tax - exempt debt financed facilities, the City
Administrator will consult with 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.
5. Records Retention.
a. Records with respect to matters described in this Subsection B will be
retained 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.
b. Records to be retained:
(i) The transcript;
(ii) Arbitrage rebate reports prepared by outside consultants;
(iii) Work papers that were provided to the rebate consultants;
(iv) Records of expenditures and investment receipts (showing timing
of expenditure and the object code of the expenditure and in the case of investment, timing of
receipt of interest earnings). (Maintenance of underlying invoices should not be required
provided the records include the date of the expenditure, payee name, payment amount and
object code; however, if those documents are maintained as a matter of policy in electronic
form, then the City should continue to maintain those records in accordance with this policy);
(v) Copies of all certificates and returns filed with the IRS (e.g., for
payment of arbitrage rebate); and
(vi) Copies of all leases, user agreements for use of the financed
property (agreements that provide for use of the property for periods longer than 30 days),
whether or not the use was within the four walls (e.g., use of the roof of the facility for a cell
phone tower).
C. 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. Unless the City is exempt from compliance with the Rule as a result
of certain permitted exemptions, the transcript for each issue will include an undertaking by the
City to comply with the Rule. The Clerk of the City will monitor compliance by the City 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."
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.
D. 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 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 Clerk of the City will maintain a listing of those
requirements and monitor compliance by the City.
Attachment A -4-