program book & lecture materials...welcome to nabl’s fourteenth annual tax and securities law...

PROGRAM BOOK & LECTURE MATERIALS March 10-11, 2016 │Omni Shoreham Hotel │ Washington, DC

Please call or e-mail: Tom Harding Thomas N. Harding and Associates, Ltd.

Telephone: (773) 477-9506E-mail: [email protected]

Website: municipalbondblueskylawservices.com330 West Diversey Parkway, Suite 906, Chicago, Illinois 60657

Thomas N. Harding and associates

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Agenda 1DC Metro Map 3 3Omni Shoreham Hotel Meeting Space 4Welcome from the Chair 5Panel Chairs 6Panelists 6Governmental & Industry Panelists 7Institute Highlights 9General Information 10Mobile App & Polling 13Sponsors 15

Materials General Session OutlineGS "P3s and Social Impact Bonds: The Next Big Thing?” 27

Securities OutlinesS-1 Current Disclosure Issues in Primary Offerings 43S-2 Current Continuing Disclosure Issues - Practitioners only 53S-3 Securities Regulatory Update 111S-4 What To Do If the SEC Calls 119S-5 The Underwriter Due Diligence Process 133

Tax OutlinesT-1 The New Money Bond Issue 163T-2 The Refunding Bond Issue 173T-3 Applying the Allocation and Accounting Regulations 183 T-4 Tax Hot Topics 195T-5 Tax Enforcement 201

Joint Session Outline J-1 Exploring the Pricing Process 215

Ethics Session OutlineE-1 Ethics and Attorney Liability 226

Table of Contents

Please call or e-mail: Tom Harding Thomas N. Harding and Associates, Ltd.

Telephone: (773) 477-9506E-mail: [email protected]

Website: municipalbondblueskylawservices.com330 West Diversey Parkway, Suite 906, Chicago, Illinois 60657


B L U E S K Y



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LexisNexis and the Knowledge Burst logo are registered trademarks of Reed Elsevier Properties Inc., used under license. NABL is a registered trademark of the National Association of Bond Lawyers. © 2016 LexisNexis. OFF03684-0 0316

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NABL experts

Start End Event LocationWednesday, March 9, 2016

5:00pm 7:00pm Check-in Desk Open West Registration Desk

Thursday, March 10, 20167:00am 5:30pm Check-In Desk West Registration Desk

7:00am 5:30pm Exhibits Open West Promenade

7:00am 8:00am Continental Breakfast Ambassador Ballroom

8:00am 9:15am S-1: Current Disclosure Issues in Primary Offerings Empire

8:00am 9:15am S-2: Current Continuing Disclosure Issues (Practitioners Only) Palladian

8:00am 9:15am T-4: Tax Hot Topics Diplomat9:15am 9:30am Break Empire, Palladian and

Diplomat Foyers9:30am 10:45am S-4: What To Do If the SEC Calls Palladian9:30am 10:45am T-1: The New Money Bond Issue Diplomat9:30am 10:45am T-5: Tax Enforcement Empire

10:45am 11:00am Break Empire, Palladian and Diplomat Foyers

11:00am 12:15pm E-1: Ethics and Attorney Liability Palladian11:00am 12:15pm S-3: Securities Regulatory Update Diplomat11:00am 12:15pm T-3: Applying the Allocation and Accounting Regulations Empire12:15pm 1:05pm Luncheon featuring David Wasserman Regency Ballroom

1:15pm 2:30pm General Session: P3s and Social Impact Bonds: The Next Big Thing? Regency Ballroom

2:30pm 2:45pm Transition Break Empire, Palladian and Diplomat Foyers

2:45pm 4:00pm S-2: Current Continuing Disclosure Issues (Practitioners Only) Palladian

2:45pm 4:00pm T-2: The Refunding Bond Issue Diplomat2:45pm 4:00pm T-5: Tax Enforcement Empire

4:00pm 4:15pm Break Empire, Palladian and Diplomat Foyers

4:15pm 5:30pm J-1: Exploring the Pricing Process Palladian

4:15pm 5:30pm S-5: The Underwriter Due Diligence Process Empire

4:15pm 5:30pm T-4: Tax Hot Topics Diplomat

5:30pm 6:30pm Welcome Reception Ambassador Ballroom

Agenda

14th Annual Tax & Securities Law Institute Page: 1

Start End Event LocationFriday, March 11, 2016

7:00am 12:30pm Information Desk & CLE Desk Open West Registration Desk7:00am 11:00am Exhibits Open West Promenade7:00am 8:00am Continental Breakfast Ambassador Ballroom8:00am 9:15am E-1: Ethics and Attorney Liability Palladian8:00am 9:15am J-1: Exploring the Pricing Process Diplomat8:00am 9:15am S-4: What To Do If the SEC Calls Congressional 8:00am 9:15am T-2: The Refunding Bond Issue Empire


9:30am 10:45am S-1: Current Disclosure Issues in Primary Offerings Diplomat9:30am 10:45am S-5: The Underwriter Due Diligence Process Palladian9:30am 10:45am T-1: The New Money Bond Issue Empire


11:00am 12:15pm S-3: Securities Regulatory Update Palladian11:00am 12:15pm T-2: The Refunding Bond Issue Empire11:00am 12:15pm T-3: Applying the Allocation and Accounting Regulations Diplomat

Securities Law

► S-1CurrentDisclosureIssuesinPrimaryOfferings► S-2CurrentContinuingDisclosureIssues-practitioners

only► S-3SecuritiesRegulatoryUpdate► S-4WhatToDoIftheSECCalls► S-5TheUnderwriterDueDiligenceProcess

Tax Law

► T-1TheNewMoneyBondIssue► T-2TheRefundingBondIssue► T-3ApplyingtheAllocationandAccountingRegulations► T-4TaxHotTopics► T-5TaxEnforcement

Ethics Session► E-1EthicsandAttorneyLiability

Joint Session

► J-1ExploringthePricingProcess

Breakout Session Topics

Agenda


DC Metro Map


Omni Shoreham Hotel | Meeting Space

NABL CHECK-IN DESKLobby Level


Welcome to NABL’s Fourteenth Annual Tax and Securities Law Institute, March 10-11, 2016, at the Omni Shoreham Hotel in Washington, D.C. This year’s theme, “Back to the Future,” acknowledges the return of the Institute to its original home in Washington D.C. and the increased use of technology at the Institute through the TSLI Mobile App. Technologypermeatesourlivesandisanincreasinglyimportantcomponentofthepublicfinanceindustryasregulatorsutilize technology to promote pricing transparency and encourage more disclosure, and market participants rely on technology to market bonds. The experienced practitioners and government representatives serving as faculty for the Institutewilldiscussthesethemesaswellasotherdevelopmentsthataretrendinginpublicfinancetoday.

The Joint Panel will explore the process of pricing bonds both from the tax law and securities law perspective. Tax panels at the Institute will discuss the latest issues confronting the Section 103 bar, including the most recent developments in tax law in the “Tax Hot Topics” panel and the new allocation and accounting regulations in “Applying the Allocation and Accounting Regulations.” Other tax panels will utilize a series of hypotheticals to examine both arbitrage and private activity problems that arise in new money and refunding bond issues and use the survey tool on the TSLI Mobile App to give audience members the opportunity to participate more actively in the discussion.

Securities law panels will discuss recent developments, such as market initiatives related to continuing disclosure, primary disclosure related to potential natural disasters, and a regulatory update from various government repre-sentatives. A panel entitled “What to Do if the SEC Calls” will provide insight into what bond counsel may expect when assisting issuer clients through the MCDC settlement process. The General Session will explore current topics in P3s, such as social infrastructure projects and social impact bonds. The ethics panel will focus on help-ing lawyers identify problematic situations and avoiding professional liability. A highlight of the Institute will be the luncheon speaker, David Wasserman, who will speak on a topic that is timely and trending - the 2016 elections. Mr. Wasserman will provide a non-partisan, insider’s view of what our future may hold.

I am grateful to my Vice-Chair, Perry Israel, for his enthusiastic and invaluable assistance in organizing the Institute. I would also like to thank all of our panelists for their participation on the panels. Their participation is not limited to speaking at the Institute but also includes many hours of preparation, particularly by the panel chairs. The Institute would not be a success without the dedication of our esteemed faculty. My sincere thanks also goes out to NABL’s Education & Member Services Committee and NABL’s staff, particularly, Susan Zelner, Gillian McBurney, Bill Daly and Linda Wyman.

On behalf of Perry and myself, welcome to the Institute. We hope that you have an enjoyable and educational experience throughout the next two days, and we also hope to see you at the Welcome Reception on Thursday, March 10, at 5:30 pm.

Carol J. McCoog2016 TSLI ChairHawkinsDelafield&WoodLLP

2016 TSLI Chair

Carol J. McCoog HawkinsDelafield&WoodLLP

Portland, OR

2016 TSLI Vice-Chair

Perry E. IsraelLawOfficeofPerryIsrael

Sacramento, CA

Welcome from the Chair


Panel Chairs

M. Jason AkersFoley & Judell, L.L.P.

New Orleans, LA

Michael BartolottaCitigroup Global Markets Inc

Houston, TX

Michael L. CheroutesColorado Center for Infrastructure

InvestmentDenver, CO

Marybeth E. FrantzHarris Beach PLLC

Pittsford, NY

Deanna L.S. GregoryPacificaLawGroupLLP

Seattle, WA

Carol L. LewStradling Yocca Carlson & Rauth

Newport Beach, CA

Kenneth R. ArtinBryant Miller Olive P.A.

Orlando, FL

Alison J. BengePacificaLawGroupLLP

Seattle, WA

Randy J. CuratoALAS, Inc.Chicago, IL

R. Todd Greenwalt Bracewell & Giuliani LLP

Houston, TX

Teri M. GuarnacciaBallard Spahr LLP

Baltimore, MD

Paul S. MacoBracewell & Giuliani LLP

Washington, DC

Navjeet K. BalSocial Finance, Inc.

Boston, MA

Peter K.M. ChanMorgan Lewis

Chicago, IL

Marc DispenseGeorge K. Baum & Company

Denver, CO

Clifford M. GerberSidley Austin LLPSan Francisco, CA

Stephen E. HeaneyStifel, Nicolaus & Company,

IncorporatedLos Angeles, CA

Darren C. McHughStradling Yocca Carlson & Rauth, P.C.

Denver, CO

*Panelists subject to change, please check the TSLI Mobile App for the most current list of panelists.

Panelists*

Richard ChirlsOrrick, Herrington & Sutcliffe LLP

New York, NY

Mitchell E. HerrHolland & Knight LLP

Miami, FL

Alexandra (Sandy) M. MacLennanSquire Patton Boggs (US) LLP

Tampa, FL

Joseph (Jodie) E. SmithMaynard Cooper & Gale P.C.

Birmingham, AL

Dee P. WisorButler Snow LLP

Denver, CO

Daniel M. DeatonNixon Peabody LLP

Los Angeles, CA

N. Gordon KnoxMiles & Stockbridge P.C.

Baltimore, MD

Jeffery J. QualkinbushBarnes & Thornburg LLP

Indianapolis, IN

Vicky TsilasBallard Spahr LLPWashington, DC

Matthias M. EdrichKutak Rock LLP

Denver, CO

Michael L. LarsenParker Poe Adams & Bernstein LLP

Charleston, SC

Bruce M. Serchuk Nixon Peabody LLP

Washington, DC

Stephen E. WeylHinckley, Allen & Snyder LLP

Boston, MA


Panelists*

Governmental & Industry Panelists* John J. Cross III

U.S. Department of the TreasuryWashington, DC

Spence HanemannInternal Revenue Service

Washington, DC

Rebecca J. Olsen U.S. Securities and Exchange

CommissionWashington, DC

Robert A. FippingerMunicipal Securities Rulemaking

BoardWashington, DC

Rebecca L. HarrigalInternal Revenue Service

Washington, DC

Johanna L. Som De CerffInternal Revenue Service

Washington, DC

LeeAnn GauntU.S. Securities and Exchange

CommissionBoston, MA

Leslie M. NorwoodSecurities Industry and Financial

Markets AssociationNew York, NY

Mark R. Zehner U.S. Securities and Exchange

CommissionPhiladelphia, PA

*Panelists subject to change, please check the TSLI Mobile App for the most current list of panelists.

John M. McNallyHawkinsDelafield&WoodLLP

Washington, DC

J. Hobson PresleyBalch & Bingham LLP

Birmingham, AL

Linda B. SchakelBallard Spahr LLPWashington, DC

Christine WalshBank of America Merrill Lynch

New York, NY

George G. WolfOrrick, Herrington & Sutcliffe LLP

San Francisco, CA

Richard J. MooreOrrick, Herrington & Sutcliffe LLP

San Francisco, CA

Mitchell RapaportNixon Peabody LLP

Washington, DC

Scott E. Schickli Orrick, Herrington & Sutcliffe LLP

Portland, OR

Bradley S. WatermanLawOfficesofBradleyS.Waterman

Washington, DC

Edwin G. OswaldOrrick, Herrington & Sutcliffe LLP

Washington, DC

Douglas RichmondAon Risk Solutions

Kansas City, KS

John O. SwendseidSherman & Howard L.L.C.

Reno, NV

Ben WatkinsFlorida State Board of Administration

Tallahassee, FL


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General Session: ““P3s and Social Impact Bonds: The Next Big Thing?”” Thursday, March 10, 1:15pm – 2:30pmRegency Ballroom

NABL Board Secretary, Dee P. Wisor will lead the panelists in dis-cussing Public Private Partnerships including the federal emphasis on P3s, types of transactions being done, advantages and disadvantag-es of various P3 models, and federal tax issues presented by P3s. The panelists will also discuss the devel-oping use of pay for performance contracts (sometimes referred to as

social impact bonds) to provide improved social outcomes. Panelists include bond lawyer, John Swendseid, former bond lawyer, Michael Cheroutes, who headed the Colorado High Performance Transportation Enterprise where he used P3sasaprojectdeliveryandfinancingmodel,andformerbond lawyer, Navjeet Bal, who is now General Counsel at SocialFinancewhichisa501(c)(3)nonprofitorganizationdedicated to mobilizing capital to drive social progress.

Luncheon Featuring David WassermanThursday, March 10, 12:15pm – 1:05pmRegency BallroomDC Update: An Insider’s Look at the 2016 Elections. David Wasserman analyzes the cur-rent congressional and electoral environment in a lively, timely, and strictly non-partisan presentation. What factors will shape the road to the White House? Will Democrats take back the Senate in 2016? Do Democrats have any hope of taking back the House? What does this polarized Congress mean for Washington’s agenda, and will the logjam ever break? Drawing on his extensive re-search on cultural and voting patterns and armed with an encyclopedic knowledge of congressional districts, Was-serman highlights critical races and picks apart what’s at stake in 2016 and beyond. He examines the parties’ mes-saging, historical trends, and the critical subgroups of voters that will determine the next president. In all of his presenta-tions, Wasserman incorporates up-to-date examples from the past week of news and fascinating facts and statistics.

Welcome Reception Thursday, March 10, 5:30pm - 6:30pm Ambassador BallroomOn Thursday evening, NABL will host a reception for all attendees. This Welcome Reception will provide a great opportunity to visit with bond lawyers from across the country as well as government representatives in the nation’s capital.

Securities SessionsThe Institute will explore the latest developments in the se-curities law area. Practitioners and regulators on the “Cur-rent Disclosure Issues in Primary Offerings” and “Current Continuing Disclosure Issues” panels will discuss, among other things, GASB 68, voluntary disclosure and amend-ments to continuing disclosure agreements. In a panel en-titled, “What To Do If The SEC Calls,” panelists will discuss the SEC enforcement process and what attorneys repre-senting issuers can expect. “The Underwriter Due Diligence Process” will explore this process from the perspective of in-house counsel, underwriter’s counsel and disclosure coun-sel, including topics such as what we have learned about underwriter’s due diligence since the 2012 risk alert and the expectations, roles and interaction among the respective counsel and the bankers. Finally, staff from the MSRB, SEC OfficeofMunicipalSecurities,andtheSECEnforcementDivision will discuss regulatory initiatives and updates and recent enforcement actions.

Tax SessionsTwo returning tax panels at the Institute will explore the lat-est issues confronting the Section 103 bar relating to “Tax Hot Topics” and “Tax Enforcement.” The most recent devel-opmentsintaxlawwillbediscussedinthefirstoftheseandthe on-going saga of handling tax enforcement will be dealt with in the latter. The three other tax panels will structured to break some new ground. Based more on a case study model, these panels will discuss tax problems facing issu-ers in “The New Money Bond Issue” and “The Refunding Bond Issue” and provide a more in-depth look at “Applying theAllocationandAccountingRegulations.”Thefirsttwoofthese panels will provide a series of related hypotheticals to examine both arbitrage and private activity problems that arise in each type of issue and provide practice pointers as well as give the audience the opportunity to participate more actively in the discussion. The last of the panels will examine the new allocation and accounting regulations through a series of hypotheticals and audience questions and answers as we work to understand how those regula-tions will be applied to a myriad of situations.

Institute Highlights


General Information

Joint PanelThe process of pricing bonds largely remains a mys-tery to most bond lawyers. However, with an increased amount of attention placed on this process by both the IRSandSEC,itisimportantforpublicfinancelawyerstobecome more familiar with how pricing works. In a joint panel entitled “Exploring the Pricing Process,” panelists will describe the process from before the time the initial offering price is determined to the free-to-trade wire and beyond. Tax law issues to be discussed include the pro-posed issue price regulations and securities law issues includeagreementsbetweenunderwritingfirmsandissu-ers in the AAU and BPA.

Ethics PanelThis year’s ethics panel entitled, “Ethics and Attorney Li-ability” will focus on how potential attorney liability can arise inthecontextofpublicfinance,bestpracticestoavoidpit-falls and how the ethical rules apply to the practice. We hope to have expert guidance from attorneys from mal-practice carriers who can share their experiences about what heightens the risk of liability.

Continuing Legal Education (CLE)The Institute offers the opportunity to earn up to 11 hours of CLE credit, depending on the jurisdiction, including ethics credit. NABL has applied for CLE credits from those states that have mandatory CLE requirements. The necessary forms will be available for you at the NABL Check-in Desk.

Closed SessionPractitioners only

S-2: Current Continuing Disclosure Issues Thursday 3/10: 8:00am - 9:15amThursday 3/10: 2:45pm - 4:00pm

All of the other sessions at TSLI are open to everyone.

Complimentary Wireless InternetComplimentary wireless internet is offered in the meeting rooms and guestrooms. To access the wireless internet in the meeting rooms, select "Omni Meeting" as your WiFi network and enter NABL2016 as your username and password.

Shoreham Spa and Health ClubThe Shoreham Spa and Health Club at the Omni offers state-of the-art equipment and is open 24 hours. It is com-plimentary for guests 18 years of age or 13 and accompa-nied by an adult. Members and guests must sign in at the spa desk prior to using the facility. Spa services such as hydrating and cleansing facials to soothing massages are of-fered at the spa. It is open daily from 8:00am – 9:00pm, and appointment may be arranged by calling (202) 756-5199.

Business CenterThe hotel’s UPS Store is located on the lobby level andprovidesafullrangeofofficeservices.ItisopenMonday-Friday from 8:00am-6:00pm.

ParkingValet parking, which includes in and out privileges, is $35 plus tax per car daily.

WEDNESDAY, 3/95:00pm – 7:00pm

THURSDAY, 3/107:00am – 5:30pm

FRIDAY, 3/117:00am – 12:30pm

NABL Check-in DeskThe Check-in Desk will operate during the following dates and times at the West Registration Desk:

Institute Highlights


Lewis Roca Rothgerber Christie is proud to support the National Association of Bond Lawyers

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Great Scott! TSLI is Mobile Download the TSLI Mobile app for a full Institute experience. The TSLI Mobile App will allow you to take part insessionpolling,findotherattendees,setyourschedule,andviewsessionoutlinesandmaterials.Fora

more interactive Institute experience, several panelists will be conducting live polling through the mobile app during their sessions. Read the information below on how to participate in the session polling. Whenyoufirstrun the app, it will take a little longer to set itself up. The time this takes depends on the device and your con-nection,sowerecommendyouallocateafewextraminuteswhenyoufirstlaunchtheapp.

How to Download the App:• Go to the Google Play or App Store on you phone or tablet. Search “NABL Events” and download the app.• Go to this link https://crowd.cc/tsli16.• Or simply scan the QR code below based on the platform of choice.

Complimentary wireless internet is available in the meeting rooms, and the username and access code will be NABL2016. Most content within the app is available whether or not you are connected to the Internet; however, for op-timal performance and to receive the most up-to-date information, a data or Wi-Fi connection is recommended. When connected, the app downloads updates (like a schedule or room change). Once downloaded, all of the data is stored locally on the device so you can access it without Wi-Fi.

Logging into the Mobile App:Access to certain features of the app require logging in, including creating your own personal schedule and adding and sharing contact information with other attendees. To log into the app, use the credientials that were emailed to you prior to TSLI If you have any questions, please stop by NABL's Check-in Desk.

Use the App to Answer Polling Questions► Load the TSLI mobile app on your device.

► Select“Agenda.”Select“SessionByDay.”Selectyourcurrentsession’scorrectdayandtime.

► Selectapollingquestion.

► Selectyouranswer.

► Select“Finish.”Select“ExitPoll.”(Youmayneedtoscrolldowntoseethe“Finish”buttonifthequestionislong.)

► Attendeesdonotneedtobeloggedintoanswerpollingquestions.

Download the app today and start planning your TSLI mobile experience. https://crowd.cc/tsli16

Mobile App & Polling


http://crowd.cc/tsli16

Download the TSLI Mobile App Now!

You can also scan this code with a QR Reader on your device.


NABL thanks all of our sponsors for their support.

Interested in sponsoring other NABL events? Contact Susan Zelner at [email protected] or call 202-503-3300.

Gold Level Sponsor

Media Sponsor

Bronze Level Sponsor

Gold Level Sponsor


Platinum Level Sponsor


Platinum Level Sponsor

Silver Level Sponsor Silver Level Sponsor

Sponsors


Sidley is proud to support the National Association of Bond Lawyers as the 2016 Diversity Sponsor.

Clifford Gerber Partner

555 California Street Suite 2000 San Francisco, California 94104 +1 415 772 1246

Find out how we are fostering inclusiveness in our law firm’s culture at

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Sidley and Sidley Austin refer to Sidley Austin LLP and affiliated partnerships as explained at www.sidley.com/disclaimer. MN-3202


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2016Fundamentals of Municipal Bond Law Seminar

May 4-6, 2016Swissotel Chicago | Chicago, IL

41st Annual Bond Attorneys' WorkshopOctober 19-21, 2016

Fairmont Chicago | Chicago, IL

201715th Annual Tax & Securities Law Institute

Members-Only EventMarch 9-10, 2017

The Omni Shoreham | Washington, DC

Fundamentals of Municipal Bond Law SeminarApril 19-21, 2017

Sheraton Downtown Denver | Denver, CO

42nd Annual Bond Attorneys' WorkshopOctober 4-6, 2017


201816th Annual Tax & Securities Law Institute

Members-Only EventFebruary 21-23, 2018

JW Marriott Phoenix Desert Ridge | Phoenix, AZ

Fundamentals of Municipal Bond Law SeminarApril 25-27, 2018

The Westin Charlotte | Charlotte, NC

43rd Annual Bond Attorneys' WorkshopSeptember 26-28, 2018


Upcoming Meetings & Educational Events


BAW41st Annual Bond

Attorneys' Workshop

Save The DateOctober 19-21, 2016 | Fairmont Chicago


FUNDAMENTALS OF MUNICIPAL BOND LAW SEMINAR20

16May 4-6, 2016 | Swissotel Chicago | Chicago, IL

Training your associates to be industry champions.


Thank you to the Bond Buyer for being the official media sponsor.

Daily editions of the Bond Buyer will be available for attendees during the Institute

by the Registration Desk.


Because opinions with respect to the interpretation of state and federal laws relating to municipal obligations fre-quently differ, the National Association of Bond Lawyers has given the authors and editors of this work the opportu-nity to express their individual legal interpretations and opinions. The interpretations and opinions are not intended toreflectanypositionofNABL,orthelawfirms,branchesofgovernment,ororganizationswithwhichtheauthorsandeditorsareassociated,unlesstheyhavebeenspecificallyadoptedbysuchorganizations.Foreducationalpurposes, the authors and editors may have employed hyperbole or offered suggested interpretations for the pur-pose of stimulating discussion. Neither the authors and editors of this volume nor NABL take responsibility as to the completeness and accuracy of the materials contained herein, and accordingly readers must conduct independent research of original sources of authority. This volume is provided to further legal education and research and is not intended to provide legal advice or counsel as to any particular situation. If you discover any errors or omissions, please direct your comments to the Chair of the Tax and Securities Law Institute for consideration in future volumes.

NATIONAL ASSOCIATION OF BOND LAWYERS601 13th Street, NW

Suite 800 South Washington, DC 20005

Copyright is not claimed for those portions hereof prepared by any official or employee of the United States of America in the course of his or her official duties.

©Copyright 2016-National Association of Bond Lawyers

NOTICE


General Session Outline


GENERAL SESSION: GS

GS: GENERAL SESSION – P3s AND SOCIAL BONDS: THE NEXT BIG THING?

Chair

Dee P. Wisor Butler Snow LLP – Denver, CO

Panelists: Navjeet K. Bal Social Finance, Inc.- Boston, MA John O. Swendseid Sherman & Howard L.L.C. – Reno, NVMark L. Cheroutes Colorado Center for Infrastructure Investment – Denver, CO

1) What is a public private partnership?

a) Public private partnership may not really be a partnership:

i) According to Black’s Law Dictionary a partnership is: A voluntary contract between

two or more competent persons to place their money, effects, labor, and skill, or some

or all of them, in lawful commerce or business, with the understanding that there shall

be a proportional sharing of the profits and losses between them.

ii) For tax purposes the IRS says: A partnership is the relationship existing between two

or more persons who join to carry on a trade or business. Each person contributes

money, property, labor or skill, and expects to share in the profits and losses of the

business.

b) There is no common definition of public private partnership.

i) According to the World Bank a public private partnership is: "a long-term contract

between a private party and a government entity, for providing a public asset or

service, in which the private party bears significant risk and management

responsibility, and remuneration is linked to performance".

ii) The National Council for Public-Private Partnerships uses this definition: A public-

private partnership (P3) is a contractual arrangement between a public agency

(federal, state or local) and a private sector entity. Through this agreement, the skills

and assets of each sector (public and private) are shared in delivering a service or

facility for the use of the general public. In addition to the sharing of resources, each

party shares in the risks and rewards potential in the delivery of the service and/or

facility.


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iii) The Federal Highway Administration (“FHWA”) says: Public-private partnerships

are contractual agreements formed between a public agency and a private sector

entity that allow for greater private sector participation in the delivery and financing

of transportation projects.

2) Increased interest in P3s in the US.

a) The American Society of Civil Engineers 2013 Report Card for American Infrastructure

gives the US a D+ and estimates the needed investment by 2020 at $3.6 Trillion.

b) With reduced federal, state and local resources for funding infrastructure, will P3s fill

some of the gap?

c) Increased Federal Government emphasis on P3 approaches.

i) Presidential Memorandum-Expanding Public-Private Collaboration on Infrastruture

Development and Financing, July 17, 2014.

(1) This launched the Build America Investment Initiative.

ii) Expanding our Nation’s Infrastructure through Innovative Financing, U.S.

Department of the Treasury, Office of Economic Policy, September 2014.

iii) FHWA encourages the use of P3 financing. https://www.fhwa.dot.gov/ipd/p3/

(1) FHWA has many tools available including a Model Public-Private Partnership

Core Toll Concessions Contract Guide

https://www.fhwa.dot.gov/ipd/pdfs/p3/model_p3_core_toll_concessions.pdf and

an Availability Payment Concessions Public-Private Partnerships Model Contract

Guide http://www.fhwa.dot.gov/ipd/p3/resources/apguide.aspx

iv) The Government Accounting Office prepared a report evaluating federal government

partnerships with the private sector. http://www.gao.gov/assets/230/226973.pdf

v) On October 26, 2015, the IRS issued final allocation and accounting regulations

which provide improved tax treatment for public-private partnerships. See,

http://federalregister.gov/a/2015-27328 as corrected in minor respects at

http://federalregister.gov/a/2015-30321 and http://federalregister.gov/a/2015-30322.

(1) NABL has encouraged additional changes to the management and other service

contract safe harbors against private business use in Revenue Procedure 97-13, as

amended by Revenue Procedure 2001-39 and Notice 2014-67.


GENERAL SESSION: GS

(a) “We offer these comments in response to the request for public comments set

forth in Notice 2014-67 and in light of recent initiatives of President Obama to

foster the development of public private collaboration on infrastructure.”

vi) The President’s FY 2016 contains a proposal for qualified public infrastructure bonds

(“QPIBs”) which would expand the availability of tax-exempt financing for use in P3

structures. QPIBs would not be subject to the bond volume cap requirement and the

alternative minimum tax (AMT) preference. Facilities eligible for QPIB financing

include airports, docks and wharves, mass commuting facilities, facilities for the

furnishing of water, sewage facilities, solid waste disposal facilities, and qualified

highway or surface freight transfer facilities.

vii) EPA Region 3 has prepared “Community Based Public Private Partnerships and

Alternative Market-Based Tools for Integrated Green Stormwater Infrastructure”

April 2015 to assist municipalities in the Chesapeake Bay region with stormwater

needs.

d) According to the National Conference of State Legislatures, as of February 2014, 33

states and Puerto Rico have adopted laws authorizing public-private partnerships for

highway and bridge projects.

e) The Bipartisan Policy Center has prepared model P3 legislation:

http://bipartisanpolicy.org/library/public-private-partnership-p3-model-legislation/

f) This increased interest in public-private partnerships has not occurred, however, without

controversy and concerns being expressed with respect to some aspects of P3s. See

“Private Roads and Public Costs”, prepared by the U.S. PRIG Education Fund at

http://cdn.publicinterestnetwork.org/assets/H5Ql0NcoPVeVJwymwlURRw/Private-

Roads-Public-Costs.pdf

3) Some types of P3 procurement

a) Design-Build

i) Private party designs and builds asset.

ii) Public entity owns, finances, operates and maintains.

b) DBOM: Design-Build-Operate-Maintain

i) Private party designs, constructs, operates and maintains the asset.

ii) Public entity owns the asset.


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c) DBF: Design-Build-Finance

i) Private party designs, constructs, and finances the asset.

ii) Public entity owns, operates and maintains the asset.

d) DBFOM: Design-Build-Finance-Operate-Maintain

i) Private party designs, constructs, finances, operates and maintains the asset.

ii) Public entity owns the asset.

e) DBFOMT: Design-Build-Finance-Operate-Maintain-Transfer

i) Private party designs, constructs, finances, owns, operates and maintains the asset. In

this model, the private party owns the asset until the end of the contract when the

ownership is transferred to the public sector.

f) Asset monetization where the public entity sells or leases an existing asset.

4) Projects which may be eligible for P3.

a) New facility (“greenfield”)

i) Presido Parkway, Denver FasTracks, Port of Miami Tunnel, I-595 Managed Lanes,

Long Beach Courthouse.

b) Existing facility (“brownfield”)

i) Chicago Skyway, Indiana Toll Road, Midway Airport.

ii) If there are outstanding tax-exempt bonds related to the facility:

(1) Do the covenants permit the P3 transaction?

(2) Remedial action rules if the P3 will cause the outstanding bonds to be private

activity bonds.

c) Most often used to provide infrastructure like transportation, ports, electric, water and

sewer airports, and broadband.

d) Can be used for social infrastructure like schools, libraries, courthouses, hospitals, and

prisons.

5) Revenues available to make payments under P3 agreement.

a) User fees collected by private party.

i) Toll roads, managed lanes, airports, parking.

ii) Private party bears risk of demand for the project.

b) Shadow Tolls


GENERAL SESSION: GS

i) Used on transportation projects where tolling may not be feasible: per vehicle

amounts paid to private party by public entity and not by users.

c) Availability payments.

i) Public entity makes performance based payments to private party once the project is

available for use. Public entity bears demand risk as the amount it pays is the same

whether the project is used or not. Often used for projects which may not be self-

supporting like mass transit or social infrastructure.

d) Sometimes payments are subject to appropriation by the public entity.

6) The capital funding for the project may include:

a) Equity of the private party.

b) Bank debt of the private party.

c) Transportation Infrastructure Finance and Innovation Act: TIFIA.

i) Fixing America’s Surface Transportation Act cuts TIFIA funding.

d) Railroad Rehabilitation & Improvement Financing: RRIF.

e) Water Infrastructure Finance and Innovation Act: WIFIA.

i) Fixing America’s Surface Transportation Act: tax-exempt bonds can now be used

with WIFIA.

f) Private activity bonds.

i) Section 142(m) of the Internal Revenue Code authorizes private activity bonds for:

surface transportation project which receives Federal assistance under Title 23;

international bridge or tunnel which receives Federal assistance under Title 23; or a

facility for transfer of freight (from truck to rail or rail to truck) which receives

Federal assistance under Title 23.

ii) Subject to volume cap limitation administered by Secretary of Transportation: up to

$15 billion. As of August 2015, almost $6 billion has been issued and another $5

billion allocated.

g) Governmental bonds.

i) Could be tax-exempt: P3 may create private business use but the private

payment/security test may not be met.

h) Government grants.

7) Possible advantages of P3:


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a) Risk transfer to private party.

b) Contract can create incentives to lead to on time under budget project delivery.

c) May bring new funding sources like private equity.

d) Can avoid underbidding.

e) Brings private sector technical expertise which public entity may not have.

f) Potential cost savings by having one entity responsible for all or significant parts of

project.

g) Better operation and maintenance. Public entities tend to defer maintenance when

revenues are constrained.

h) Full life cycle costs represented by contract: construction costs, operations and

maintenance, capital replacement.

i) Possible source of funding for other public entity purposes: for example public entity

leases a project to a private party and uses the upfront lease payment to redeem debt.

8) Possible disadvantages:

a) Higher transaction costs.

b) Higher financing costs as opposed to traditional tax-exempt financing.

c) Private parties must pay taxes (e.g., income and property taxes) which public entities do

not and those costs will be recovered through P3 payments.

d) Private entity operation of a project could mean loss of governmental immunity for tort

liabilities.

e) Loss of control by public entity. For example, toll or rate setting may not be controlled by

public entity.

f) Lack of transparency.

i) The Colorado General Assembly passed a bill on CDOT P3 transparency which the

Governor vetoed. The Governor than signed an executive order to increase

transparency on CDOT P3 projects.

ii) The Virginia General Assembly passes legislation to create the Public-Private

Partnership Advisory Commission.

g) Foreign entity ownership of a government asset.

h) P3 model may not work for small project.


i) A public entity which does not have the resources to fund a project through a tax-exempt

bond model will not have revenues to pay P3 obligations.

9) Value for money analysis is done to determine if the project should use a P3 procurement.

a) Compares the costs and benefits of a traditional governmental procurement to the costs of

the P3 procurement over the life of the project.

10) Some 2015 P3 transactions which reached financial close:

a) North Carolina's I-77 HOT Lanes P3.

b) Ohio's Portsmouth Bypass.

c) Pennsylvania's Rapid Bridges Replacement Project.

d) Michigan freeway lighting P3.

e) Kentucky broadband P3.

11) Some recent P3 transactions which did not proceed or were terminated:

a) Indianapolis Justice Center P3.

b) Virginia Department of Transportation (VDOT) ended its contract to build a new 55-mile

section of U.S. 460 between Petersburg and Suffolk.

c) Accelerated Regional Transportation Improvements project in Los Angeles.

d) Project Neon to improve I-15 in Las Vegas.


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TSLI │ March 10-11, 2016 │Omni Shoreham Hotel │ Washington, DC

General Session:P3s and Social Impact

Bonds: The Next Big Thing?

The General Session will use live polling via the TSLI App

To Download the TSLI App, Connect Your Mobile Device to WiFiTo access the wireless internet, select "Omni Meeting" as your WiFinetwork

Username: NABL2016 Password: NABL2016

(Both are case sensitive)

Downloading the TSLI App• Go to your device’s mobile app store (On

Apple devices, the App Store. On Android devices, the Google Play store)

• Search “nabl” or “nabl events”

• Download NABL Events

Using the App to Answer Polling Questions• Download the TSLI event.

• Select “Agenda.” Select “Session By Day.” Select Thursday, March 10. Select General Session.

• Select polling question #1. Select an answer. Scroll down. Select “Finish.” Select “Exit Poll.”


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3/9/2016

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TSLI │ March 10-11, 2016 │Omni Shoreham Hotel │ Washington, DC

General Session:P3s and Social Impact

Bonds: The Next Big Thing?

The General Session will use live polling via the TSLI App

To Download the TSLI App, Connect Your Mobile Device to WiFiTo access the wireless internet, select "Omni Meeting" as your WiFinetwork

Username: NABL2016 Password: NABL2016

(Both are case sensitive)

Downloading the TSLI App• Go to your device’s mobile app store (On

Apple devices, the App Store. On Android devices, the Google Play store)

• Search “nabl” or “nabl events”

• Download NABL Events

Using the App to Answer Polling Questions• Download the TSLI event.

• Select “Agenda.” Select “Session By Day.” Select Thursday, March 10. Select General Session.

• Select polling question #1. Select an answer. Scroll down. Select “Finish.” Select “Exit Poll.”

3/9/2016

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Q1: What types of P3 projects have you worked on: (Pick all that apply)

□ Roads, bridges and tunnels□ Mass transit□ Governmental buildings□ Stadium□ Broadband □ Parking□ Street Lighting□ Water, Wastewater and Storm Drainage□ Other

Live Poll Results

Q2: What is the status of P3 legislation in your State?

A.Statute broadly authorizing P3s adopted

B.Statute authorizing P3s in a particular sector (e.g., transportation) adopted

C.Legislation being considered

D.No statutory authorityLive Poll Results


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Q3: Pick the two types of state laws in your experience that are most difficult to deal with in financing a PPP project.

A. Laws that require competitive bidding of the construction of public works (however defined) projects?

B. Other procurement laws that may require some sort of public or competitive process be used to select a private partner?

C. Constitutional or statutory requirements that prevent a government from making a binding contract with a private partner to make payments over a term that extends beyond a budget year, budgeted amount or other limit?

D. Well intended laws specifically allowing PPPs that are too detailed to be practical to use in many situations?

E. Any state laws the requirements of which are not presumptively and conclusively met on receipt of a favorable opinion from nationally recognized bond counsel?

Live Poll Results

Q4: Which two changes in tax law/regulation/guidance would best facilitate financing of public private partnership projects for governmental or publicly used facilities in your practice?

A. Constitutional or statutory requirements that prohibit or limit a government’s ability to participate in a joint ventures, including provisions prohibiting the “loaning of credit”?

B. Procurement laws that require public bidding or the use of a public or competitive to select a PPP participant?

C. Constitutional or statutory requirements that prevent a government from making a binding contract to make payments over a term that extends beyond a budget year or similar limit?



Live Poll Results


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3/9/2016

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Q3: Pick the two types of state laws in your experience that are most difficult to deal with in financing a PPP project.

A. Laws that require competitive bidding of the construction of public works (however defined) projects?

B. Other procurement laws that may require some sort of public or competitive process be used to select a private partner?

C. Constitutional or statutory requirements that prevent a government from making a binding contract with a private partner to make payments over a term that extends beyond a budget year, budgeted amount or other limit?



Live Poll Results

Q4: Which two changes in tax law/regulation/guidance would best facilitate financing of public private partnership projects for governmental or publicly used facilities in your practice?

A. Constitutional or statutory requirements that prohibit or limit a government’s ability to participate in a joint ventures, including provisions prohibiting the “loaning of credit”?

B. Procurement laws that require public bidding or the use of a public or competitive to select a PPP participant?

C. Constitutional or statutory requirements that prevent a government from making a binding contract to make payments over a term that extends beyond a budget year or similar limit?



Live Poll Results

3/9/2016

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Introduction to pay for success

Navjeet BalVice President and General Counsel

Q5: Are your government clients interested in SIBs?

A. My clients have never heard of them before

B. Preliminary discussions are happening at the policy level

C. My client(s) are actively engaged in getting necessary authorization for SIBs

D. My client(s) have entered into a SIB/PFS contract

Live Poll Results16

“What works”

Impact Investing

Government accountability

Pay for

Success

PAY FOR SUCCESS SITS AT THE INTERSECTION OF THREE POWERFUL MOVEMENTS


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17

WHAT IS PAY FOR SUCCESS?Nonprofit

interventionprovider

Private funders / impact investors

Payor(often

government)

Expansion capital ($) Outcomes

Repayment ($)

Pay for Success is about measurably improving thelives of people most in need by driving government

resources toward more effective programs 18

EXAMPLE: NEW YORK WORKFORCE RE-ENTRY TRANSACTION

Service Provider

2,000 High-Risk Formerly

Incarcerated Individuals

2013 deal with Center for Employment Opportunities (CEO)

Impact Investors

Intermediary

Evaluator / Validator

Outcome Payor

placed by Bank of America

Target Population

19

11 PAY FOR SUCCESS DEALS HAVE REACHED THE MARKET TO DATEIssue areas evolving rapidly

Teen Pregnancy Asthma Veterans Workforce Diabetes

Photographs courtesy of Center for Employment Opportunities, Chicago Public Schools, FrontLine Services, and Nurse-Family Partnership.

Additional projects in development:

• New York City

• New York State• Massachusetts

Criminal Justice (Recidivism)

1

2

3

Salt Lake CountyChicago

Early Childhood Education

4

5

• Cuyahoga County• Massachusetts• Denver

Homelessness

6

7

8

• South Carolina• Connecticut*

10

*Signed contract, launch pending project financing

• Santa Clara9

11

Families & Health

20

THE PAY FOR SUCCESS LANDSCAPE IS EVOLVING QUICKLY

Taken steps to explore PFS (legislation, procurement, developing project)

Active PFS project launched

2011 2016

Do Not Distribute

MARCH 2016


GENERAL SESSION: GS

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5

17

WHAT IS PAY FOR SUCCESS?Nonprofit

interventionprovider

Private funders / impact investors

Payor(often

government)

Expansion capital ($) Outcomes

Repayment ($)

Pay for Success is about measurably improving thelives of people most in need by driving government

resources toward more effective programs 18

EXAMPLE: NEW YORK WORKFORCE RE-ENTRY TRANSACTION

Service Provider

2,000 High-Risk Formerly

Incarcerated Individuals

2013 deal with Center for Employment Opportunities (CEO)

Impact Investors

Intermediary

Evaluator / Validator

Outcome Payor

placed by Bank of America

Target Population

19

11 PAY FOR SUCCESS DEALS HAVE REACHED THE MARKET TO DATEIssue areas evolving rapidly

Teen Pregnancy Asthma Veterans Workforce Diabetes

Photographs courtesy of Center for Employment Opportunities, Chicago Public Schools, FrontLine Services, and Nurse-Family Partnership.

Additional projects in development:

• New York City

• New York State• Massachusetts

Criminal Justice (Recidivism)

1

2

3

Salt Lake CountyChicago

Early Childhood Education

4

5

• Cuyahoga County• Massachusetts• Denver

Homelessness

6

7

8

• South Carolina• Connecticut*

10

*Signed contract, launch pending project financing

• Santa Clara9

11

Families & Health

20

THE PAY FOR SUCCESS LANDSCAPE IS EVOLVING QUICKLY

Taken steps to explore PFS (legislation, procurement, developing project)

Active PFS project launched

2011 2016

Do Not Distribute

MARCH 2016

3/9/2016

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Q6: Does your state have legislation authorizing pay for performance contracting?

□ Yes□ No

Live Poll Results22

WHY DO WE CARE ABOUT PAY FOR SUCCESS?

Focus on evidence and outcomes

Helps scale up high-quality services

Influences government funding decisions

23

WHEN IS PAY FOR SUCCESS USEFUL?

Underserved, large-scale population, with adequate demand for intervention

Defined Target Population

Key intervention outcomes measured against carefully constructed control

Rigorously Evaluated

Well-codified program model with fidelity monitoringCodified Program Model

High-quality providers with capacity to scaleScalable Service Providers

Outcomes attract civic and/or commercial supportInterest From Payors

Clear link to economic savings / benefit within acceptable timeframePositive Economics

Only appropriate for interventions meeting a number of criteria

Q7: Which of the following is an actual hashtag on Twitter: (Pick all that apply)A. #PublicPrivatePtnsP3B. #PayforSuccessC. #MoneyForNothingD. #RepealTaxCode

Live Poll Results


Securities Outlines


SECURITIES LAW: S-1

S-1 CURRENT DISCLOSURE ISSUES IN PRIMARY OFFERINGS

Chair:

Jeffery J. Qualkinbush Barnes & Thornburg LLP – Indianapolis, IN

Panelists:

Teri M. Guarnaccia Ballard Spahr LLP – Baltimore, MD M. Jason Akers Foley & Judell, L.L.P. – New Orleans, LA


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CURRENT DISCLOSURE ISSUES IN PRIMARY OFFERINGS

I. DISCLOSURES REGARDING PAST CONTINUING DISCLOSURE COMPLIANCE AND CORRECTIVE 15C2-12 FILINGS

A. Background.a. The Securities and Exchange Commission (the “SEC”) has issued three series or

groups of settlement agreements with several of the underwriters which self-reported under the SEC’s Municipal Continuing Disclosure Cooperation Initiative (“MCDC”); however, the SEC has not yet issued any settlement agreements with governmental entities or obligated persons which self-reported under the MCDC.

b. Although the SEC previously stated that the settlement agreements issued under MCDC would provide guidance regarding what the SEC believes to be material misstatements regarding prior continuing disclosure compliance by obligated persons, industry professionals have not found the examples provided by the SEC in these first three series of settlement agreements to provide much, if any, guidance on the SEC’s position.

B. Disclosure Considerations. a. What is an appropriate level of detail for disclosure in an official statement of past

failures to comply with continuing disclosure undertakings?

i. If the obligated person believes during the past five years it has complied, in all material respects, with its previous undertakings, should it make such a statement in the official statement?

ii. If the obligated person believes during the past five years it has complied, in all material respects, with its previous undertakings, should it list in the official statement all non-material compliance failures in the past five years?

iii. If the obligated person has failed to file an event notice for a change in the ratings of one or more series of bonds, should it list in the official statement such failure to file?

iv. If the obligated person filed its annual financial information and audited financial statements on a timely basis for many series of the bonds, but failed to link such information to the CUSIPs of one or more series of bonds, should it list in the official statement such failure?

v. If the obligated person was slow or late in filing the audited financial statements but filed the unaudited financial statements during the past five years within the time required by the previous undertakings, should it make such a statement in the official statement?

vi. What statement or statements need to be included in the official statement regarding the steps the obligated person has taken to ensure future compliance?

b. How long should an issuer continue to detail past failures to comply with its continuing disclosure undertakings in its official statements? Note that part of the requirements of any settlement with an issuer under MCDC is that the issuer must


SECURITIES LAW: S-1

publish details of the settlement in its official statements for the next five years. However, settlements are only necessary for failures for which the Division of Enforcement believes enforcement action is necessary.

c. When does the five-year reporting period for non-compliance start? Does it begin on the date the failure occurs, or does it begin on the date the failure is corrected and an event notice of non-compliance is filed with EMMA?

II. “GREEN” BONDS

A. What are “Green” Bonds?a. From The Economist, “Green grow the markets, O” (July 5, 2014) – “Nonetheless,

there is far from universal agreement over the question, ‘What makes a bond green?’”

b. The World Bank maintains a green bond program designed to finance projects for the mitigation of and/or the adaptation to, climate change. Implementation of the program includes eligibility criteria for projects and methods of monitoring compliance with program principles.

c. On January 13, 2014, a group of financial institutions published the “Green Bonds Principles,” which is a set of voluntary guidelines for potential green bond issuers as to disclosure.

i. Green bonds are roughly defined as bonds which finance projects and activities that promote climate or other environmental sustainability purposes.

ii. Principles focus on four key areas of information (A) eligible uses of bond proceeds, (B) processes for evaluating and selecting of projects, (C) methods to track bond proceeds and (D) ongoing reporting of project performance.

iii. The group that initially created the principles has also established a Green Bonds Principles Governance Framework, which provides a mechanism for interested issuers, underwriters and investors to participate in updating the Green Bonds Principles.

B. Disclosure Considerations.a. Is information on the “green” nature of the projects funded with the proceeds of green

bonds material to an investor’s decision whether or not to purchase the bonds for purposes of Rule 10b-5?

i. The bonds are purposely marketed as “green” bonds.

ii. If the bonds are not in default, there is no incipient risk of default, and their tax-exempt status is not in jeopardy, but the project financed with bond proceeds is no longer considered “green,” how would any harm to an investor be measured?

iii. If the project financed with bond proceeds is no longer considered “green,” does it affect the value at which the bonds would be sold in the secondary market?

b. Should information on the “green” nature of bond-financed projects be considered part of the annual financial information for purposes of Rule 15c2-12?

i. Many green projects may not have any environmental “performance” which can be measured after completion of construction.


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ii. Under SEC Releases 33-7856 and 34-42728 on electronic delivery of information, both the official statement and the issuer’s web site should contain disclaimers that the information regarding the use of proceeds of the green bonds does not constitute part of the official statement.

C. Sample Disclosure.The Green Bonds are general obligations of the Commonwealth issued to finance projects that are designed to be environmentally beneficial. The purpose of labeling a portion of the Commonwealth’s general obligation bonds as Green Bonds is to allow investors to invest directly in environmentally beneficial projects.

As outlined in the Capital Plan, the Commonwealth develops policies and targets capital investments that balance sustainable economic development, quality of life and the protection of natural resources. The Commonwealth is selling “Green Bonds” to finance the investment of certain projects that fall into the following four categories (collectively, “Green Projects”) that are designed to be environmentally beneficial, for which the selection methodology is outlined below:

Clean Water and Drinking Water Projects.

Methodology: Projects which are designed to improve the quality of the Commonwealth’s drinking water or reduce pollution in the Commonwealth’s water supply according to state and federal standards. Projects may include initiatives involving the Massachusetts Water Pollution Abatement Trust, a state agency established pursuant to Title VI of the Federal Clean Water Act, for clean drinking water and reduction of water pollution.

Energy Efficiency and Conservation Projects in State Buildings.

Methodology: Projects which are designed to reduce energy costs in existing public buildings or create new energy-saving “green” buildings. This category may include projects within the Accelerated Energy Program, a three-year initiative to “green” 700 sites in 700 working days encompassing over 4,000 state buildings. This program includes projects designed to reduce greenhouse gas emissions, energy use and water use across Commonwealth facilities. This category may also include the construction of a headquarters building for the Massachusetts Division of Fisheries and Wildlife which is expected to achieve zero net energy through solar photovoltaics, innovative mechanical systems and building envelope quality.

Land Acquisition, Open Space Protection and Environmental Remediation Projects.

Methodology: Projects which support open space as well as environmental clean-up efforts at various sites, including Federal Superfund Site restorations and other brownfield remediation and clean-up projects. Projects under this category may also include land protection programs, including open space acquisitions and wildland acquisitions.

River Revitalization and Preservation and Habitat Restoration Projects.

Methodology: Projects which restore waterways and riverine habitats. The projects may include rehabilitation of environments or ecologies which have suffered from


SECURITIES LAW: S-1

human development or invasive species. This category may include natural habitat restoration and management, wetland restoration, flood control and urban reforestation projects.

Proceeds of the Green Bonds are expected to be used to fund some or all of such types of Green Projects. Green Bonds are general obligations of the Commonwealth, and holders of the Green Bonds do not assume any specific project risk related to any of the funded Green Projects.

The Commonwealth plans to post quarterly updates on use of Green Bonds proceeds via its website: www.massbondholder.com. The Commonwealth plans to post a final list of projects funded when all proceeds of the Green Bonds have been spent.

III. PENSION DISCLOSURE

A. SEC Focus – In a December 3, 2014 article in The Bond Buyer, SEC Commissioner Daniel Gallagher indicated general dissatisfaction with the state of public pension and OPEB disclosure. He advocated an increase in Commission resources overseeing the municipal market, more frequent enforcement in the area of pension disclosure and the exploration of new ways to induce issuers to adopt recent GASB standards.

B. GASB Statements Nos. 67 and 68 – These statements both apply to employee pension accounting and financial reporting. Statement No. 67 went into effect for financial reporting of fiscal years beginning after June 15, 2013 and Statement No. 68 went into effect for financial reporting of fiscal years beginning after June 15, 2014.

a. These reporting requirements make some significant changes regarding how the pension liability is calculated including potential changes in the discount rate used.

b. Cost sharing participants in pooled pension programs, will be required to include a proportionate share of the pension liability of the pool instead of the amount the participant has been billed by the pool.

c. For a very detailed discussion of Statement No. 67 and Statement No. 68, please listen to the NABL Teleconference It is 2015: Pension Disclosure and GASB 68 held on June 16, 2015, and available to NABL members at the NABL Website (www.nabl.org).

IV. BANK LOANS (Note – this topic addresses bank loans as a topic of disclosure in primary offerings of bonds, not application of Rule 15c2-12 to disclosure of bank loans themselves)A. Background - MSRB Notice 2012-18, Notice Concerning Voluntary Disclosure of Bank

Loans to EMMA (April 3, 2012) – discusses, in the context of encouraging voluntary reporting of bank loans to EMMA, disclosure concerns from the increase in issuer financing via bank loans, which are often not disclosed until release of the issuer’s audited financial statements, and often only as part of an aggregate debt total.

a. Lack of timeliness.

b. Concern over loan covenants which could cause acceleration of the debt.

c. Possible parity position of loans with respect to issuer bonds as to security may dilute security position of bondholders.


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B. Disclosure Considerations.a. Direct bank loans should be incorporated into the issuer’s most recently audited

financial statements (normally attached to the issuer’s official statements).

b. However, the terms and provisions contained in the bank loan documents are often material to bond purchasers.

i. Financial or other covenants of the issuer.

ii. Events of default, including cross-default provisions.

iii. Remedies upon default.

iv. Liens and/or pledges of security for the bonds.

c. Beware direct bank loans which contain bank fees in a side letter. Such side letters may also contain issuer continuing covenants not included in the loan or reimbursement agreement.

V. LEGISLATIVE CHANGES – To what extent should the official statement disclose potential legislative changes affecting the tax-exempt status of the bonds or the status of the issuer’s pension liabilities?

A. Sample Language. a. Example 1 There are or may be pending in the Congress of the United States legislative proposals, including some that carry retroactive dates that, if enacted, could alter or amend the federal tax matters referred to above or affect the market value of the bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether, if enacted, it would apply to bonds issued prior to enactment”

b. Example 2 The information presented in this Official Statement is based on the laws and regulations of the United States of America and the State of _________ and related court and administrative law decisions in effect as of the date of this Official Statement (collectively, the “Laws”). In addition, the opinions delivered in connection with the issuance of the 2014 Bonds are based on the Laws. No assurance can be given as to the impact, if any, future events, regulations, legislation, court decisions or administrative decisions may have with respect to the Laws or that any or all of the Laws will remain in effect during the entire term of the 2014 Bonds.

B. Should such disclosure be generic, or limited to specific proposals? What is the legislative threshold below which the adoption of specific legislation should be considered too speculative to disclose? How does this compare to the language frequently found in a bond purchase agreement that provides the underwriter with the right to terminate its obligation to purchase the bonds if the underwriter believes the introduction of legislation may have a material impact of the marketability of the bonds?


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VI. NATURAL DISASTERS – To what extent should the official statement disclose potential natural disasters affecting the economic strength of the obligated party to repay the bonds?

A. Sample Language. a. Example 1

In 2008, the University was closed for the fall semester as a result of damage caused by Hurricane Ike to the area surrounding the University. There can be no assurance that a hurricane or other weather related event will not affect the operations of the University and therefore the ability of the Borrower to operate the Series 2014 Project. If the Series 2014 Project is unable to open for operations as a result of such a weather related event, the Ground Lessor is obligated pursuant to the Ground Lease to pay an amount sufficient to meet debt service payments and other recurring payments from the date of such suspension or interruption. Such payments are required under the Ground Lease to continue until such time as the Series 2014 Project is available to be occupied and thereafter until the revenues of the Series 2014 Project, without regard to insurance proceeds or payments by the Ground Lessor or the University, will be sufficient to maintain a Fixed Charges Coverage Ratio of not less than 1.20 for the most recently completed fiscal year, irrespective of the length of time required to meet such requirement. See “THE GROUND LEASE – Ground Lessor Commitment to Repair and Replace the Series 2014 Project” herein. In the event of a weather event affecting the University and the ability of the Series 2014 Project to operate, unless the Ground Lessor is no longer obligated to pay for repair, replacement or lost revenues as provided in the Ground Lease, the only obligor with respect to such payments is the Ground Lessor.

b. Example 2 The Issuer is located along the Gulf Coast of Louisiana in an area that is prone to hurricanes and other tropical events. In the last ten years, Hurricanes Gustav, Ike and Isaac, along with less intense tropical storms and tropical depressions, have impacted parts of the Louisiana coast. In addition, Hurricanes Katrina and Rita caused significant damage to various parts of Louisiana in 2005. The Issuer cannot predict if or when any such tropical event will occur or the effect any such tropical event may have on its operations, population, demographics, economic or financial stability, or ability to pay debt service on the Bonds.

B. Should such disclosure regarding natural disasters be included in all official statements or only in those for governmental entities that have a history of large scale natural disasters? How is this helpful to potential investors?

VII. BANKRUPTCY

A. Background.a. Municipalities cannot be forced into involuntary bankruptcy and need to be

specifically authorized by their state to file Chapter 9 municipal bankruptcy. There are 22 states that either do not permit bankruptcy or otherwise give specific authorization for municipal bankruptcy. Of the remaining 28 states, there are varying requirements for bankruptcy.


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b. The law of the applicable state may authorize other remedies for issuers in financial distress short of bankruptcy, but with equally transformative results.

i. State appointed individual or body to provide some level of financial oversight.

ii. State appointed receiver.

c. A number of equitable remedies are also available through state court.

i. Writ of mandamus allowing creditors to compel the assessment of a tax.

ii. Appointment of a receiver.

B. Disclosure Considerations. a. Discussion of Chapter 9 Bankruptcy

i. Should the official statement specifically discuss the lack of availability to the issuer of Chapter 9 bankruptcy if it is not available under State law?

ii. Should the security section discuss the potential priority treatment in bankruptcy of bondholders’ claims on the security for the bonds, e.g. a general obligation of the issuer versus a pledge of revenues or receipts pursuant to an indenture? What about their position versus other creditors, e.g. bond insurers?

iii. If bonds are secured by lease payments of a local government, should the official statement discuss the local government’s ability to reject the lease in bankruptcy (and the differences in its monetary obligations depending on whether the lease is a capital or an operating lease)?

b. Discussion of Other Remedies

i. Should the official statement discuss State law statutory remedies for financially distressed local governments, either those which may be imposed, or those that are voluntary?

ii. What about equitable remedies? To what extent should the standard caveats in bond counsel’s opinion regarding enforceability be highlighted in the body of the official statement?

VIII. GENERAL OBLIGATION DEBT

A. Distinguish between the nature of the bonds as an obligation of the issuer and the nature of the security for the bonds.

a. Bonds are a limited obligation of an issuer if payment is limited to a specific source of revenue or funds of the issuer. Bonds are a general obligation of an issuer if they are payable from any legally available source of revenues or funds of the issuer.

b. Disclosure should itemize those general categories of revenues or funds which are available to the issuer, e.g. property taxes, sales taxes, state aid, etc.

c. Disclosure should also specifically mention those sources of revenues or funds which are not legally available to the issuer for payment of the bonds, or which have priority over payment of the bonds.


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d. Disclosure should also discuss the issuer’s financial operations (funds, cash on hand, etc.), budgetary process and recent history of expenditures against budgeted amounts.

B. Disclosure of security for general obligation bonds.

a. Pledges of taxes require disclosure of the legal mechanisms for the imposition and collection of such taxes (including timing of imposition and collection of taxes as compared to the debt service schedule for the bonds), any limitations on imposition and any other uses with a claim against tax revenues.

b. Taxes of general applicability require disclosure of issuer demographic information and collections over a recent historical period (typically ten years, but some people are having experiences with the rating agencies requesting 25+ years).

c. Pledges of aid from another governmental body should include a discussion of the legal mechanisms for receipt of aid and/or appropriation risk, as applicable.

IX. OTHER RECENT ISSUES RAISED IN PRIMARY OFFERINGS

A. What disclosure, if any, should be provided in the official statement about secondary market trading, including the possibility of a secondary market not developing or ceasing to exist over time?

B. What disclosure, if any, should be provided in the official statement on a non-party entity if the financial stability of the entity directly responsible for paying the debt service on the bonds is contingent (even remotely) on the financial stability of the non-party entity. Examples of transactions in which this could arise may be a University’s student fee bond financing in which the State provides annual appropriations to the University to assist in the repayment of the bonds or a public hospital financing that is receives city or county subsidies to support its operations.

X. CERTIFICATION OF THE OFFICIAL STATEMENT

A. Certification by the issuer and all entities responsible for the repayment of the bonds is standard in the industry.

B. What certification of the official statement is being provided by the professional or professionals who have assisted the issuer in the preparation of the official statement?

C. What opinion letters regarding the official statement are being provided by the counsels involved in the transaction?


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S-2: CURRENT CONTINUING DISCLOSURE ISSUES

Chair:

Alexandra M. MacLennan Squire Patton Boggs (US) LLP - Tampa, FL

Panelists:

J. Ben Watkins III Florida State Board of Administration - Tallahassee, FL Michael G. Bartolotta Citigroup Global Markets, Inc. - Houston, TX Paul S. Maco Bracewell & Guiliani LLP - Washington, D.C

This panel will explore the current market initiatives underway to enhance compliance with continuing disclosure undertakings under Rule 15c2-12 and discuss voluntary disclosure practices beyond contractual requirements. This panel is designated as “Practitioners Only” in order to facilitate open and free discussion of various proposals and approaches being discussed.


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CONTINUING DISCLOSURE: Creating Blueprints for Enhanced Disclosure

I. Historical Timeline for SEC Rule 15c2-12.

A. SEC Rule 15c2-121 went into effect January 1, 1990. It was proposed and adopted in the aftermath of the massive default in the Washington Public Power Supply System bond transactions. In fact, the proposing release was published on the same date the SEC Staff Report on the Investigation in the Matter of Transactions in Washington Public Power Supply System Securities (1988) was delivered to Congress. The rule, as adopted, required participating underwriters in certain municipal securities transactions to obtain and review issuer’s disclosure documents before purchasing securities and to provide copies of those disclosure documents to their investing customers. The proposing release2 also included a discussion of the SEC’s views on an underwriter’s obligation to have a reasonable basis for recommending the purchase of municipal securities and, in connection with that obligation, to review the accuracy of the statements made in the issuer’s disclosure documents in a professional manner.

B. On March 9, 1994, the SEC published its views on the disclosure obligations of various participants in municipal securities transactions under federal anti-fraud laws in both primary offerings of securities as well as with respect to disclosure on a continuing basis in the secondary market.3 On the same date, the SEC proposed amendments to Rule 15c2-124 thatwould prohibit (subject to certain exceptions and exemptions) underwriters from participating in municipal securities transactions unless the issuer contractually agrees to provide certain disclosure on a continuing basis while the securities are outstanding. The final rule amendments were adopted November 10, 19945 and applied to municipal securities sold on or after July 3, 1995.

C. The market operated under the rule as adopted in 1994 for nearly 15 years before the SEC proposed further amendments to the rule on July 30, 20086. The 2008 amendment disposed of the original multiple repository system (the “NRMSIRs”) in favor of a single internet-based repository system operated by the Municipal Securities Rulemaking Board commonly known as “EMMA.” The 2008 amendments were made final on December 5, 20087

and went into effect July 1, 2009 marking an end to the long national NRMSIR nightmare (or so it was thought).

D. On July 17, 2009, the SEC proposed additional amendments to the rule8 that, for the first time since 1994, changed the required content of continuing disclosure undertakings,

1 17 CFR 240.15c2-12.2 SEC Release No. 34-26100 (September 22, 1988). 3 SEC Release No. 33-7049, 34-33741 (March 9, 1994). 4 SEC Release No. 34-33742 (March 9, 1994). 5 SEC Release No. 34-34961 (November 10, 1994) 6 SEC Release No. 34-58255 (July 30, 2008). 7 SEC Release No. 34-59062 (December 5, 2008). 8 SEC Release No. 34-60332 (July 17, 2009).


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imposed a 10 business day deadline for event disclosure, removed the materiality standard from some events and modified the exemption provisions for variable rate demand obligations. The adopting release9 also included interpretive guidance regarding the obligation of participating underwriters to evaluate the likelihood of future compliance by the issuer with its continuing disclosure undertakings, a harbinger of sorts for the SEC’s Municipalities Continuing Disclosure Cooperation Initiative announced in March 2014.

II. The SEC Report on the Municipal Securities Market (July 31, 2012)

A. In July 2012, the United States Securities and Exchange Commission released its Report on the Municipal Securities Market.10

B. Contains the SEC’s recommendations to improve municipal disclosure and market structure (particularly for pre- and post-trade price transparency.

C. Multi-pronged approach, including legislative and regulatory changes, as well as encouragement for more industry-based initiatives.

D. The SEC’s recommendations in the report touched on Continuing Disclosure in a number of ways:

1. SEC recommended addressing compliance issues regarding continuing disclosure by requiring issuers have disclosure policies and procedures in place regarding their disclosure obligations and suggesting a mechanism to enforce compliance with continuing disclosure agreements and other obligations of municipal issuers

2. SEC wants additional event disclosures relating to issuance of new debt (whether or not subject to Rule 15c2-12 and whether or not arising as a result of a municipal securities issuance).

3. The SEC recommended a safe harbor from private liability for forward-looking statements in disclosure materials, but only to municipal issuers that provide ongoing public disclosures on a current and timely basis.

III. The Municipalities Continuing Disclosure Cooperation Initiative

A. In March 2014, the SEC Division of Enforcement announced the Municipalities Continuing Disclosure Cooperation Initiative (the “MCDC Initiative”), a self-reporting program intended to address what the SEC believed were potentially widespread violations of the federal securities laws resulting from misrepresentations in municipal bond offering documents about prior compliance with continuing disclosure obligations.

B. Pursuant to the MCDC Initiative, the SEC Division of Enforcement agreed to recommend standardized settlement terms to issuers and obligated persons involved in the offer or sale of municipal securities (collectively, “issuers”) as well as underwriters of such offerings

9 SEC Release No. 34-62184A (June 10, 2010). 10 Issued July 31, 2012; available at www.sec.gov.


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if they self-reported to the Division possible violations involving materially inaccurate statements relating to prior compliance with the continuing disclosure undertakings required by Rule 15c2-12.

C. The standardized settlement terms require underwriters to:

1. retain an independent consultant, not unacceptable to the SEC staff, to conduct a compliance review and, within 180 days of the institution of proceedings, provide recommendations to the underwriter regarding the underwriter’s municipal underwriting due diligence process and procedures;

2. within 90 days of the independent consultant’s recommendations, take reasonable steps to enact such recommendations; provided that the underwriter may seek approval from the SE staff to not adopt recommendations that the underwriter can demonstrate to be unduly burdensome;

3. cooperate with any subsequent investigation by the SEC Division of Enforcement regarding the false statement(s), including the roles of individuals and/or other parties involved; and

4. provide the SEC staff with a compliance certification regarding the applicable undertakings by the underwriter on the one-year anniversary of the date of institution of the proceedings.

D. Under the proposed standardized settlement terms with respect to issuers, the issuer must undertake to:

1. establish appropriate policies and procedures and training regarding continuing disclosure obligations within 180 days of the institution of the proceedings;

2. comply with existing continuing disclosure undertakings, including updating past delinquent filings within 180 days of the institution of the proceedings;

3. cooperate with any subsequent investigation by the SEC Enforcement Division regarding the false statement(s), including the roles of individuals and/or other parties involved;

4. disclose in a clear and conspicuous fashion the settlement terms in any final official statement for an offering by the issuer within five years of the date of institution of the proceedings; and

5. provide the SEC staff with a compliance certification regarding the applicable undertakings by the issuer on the one-year anniversary of the date of institution of the proceedings.

E. On June 18, 2015, the SEC approved settlements with 36 underwriters who had self-reported under the MCDC Initiative.


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F. Included within the settlement agreements are 92 examples of what the SEC Division of Enforcement cited as municipal securities offerings that contained misstatements (or omissions) about continuing disclosure compliance in official statements since 2010.

G. On September 30, 2015, the SEC announced an additional 22 settlements with underwriters under the MCDC initiative.

IV. Current Industry Initiatives

A. In late October, 2015, SIFMA hosted a meeting of municipal market stakeholders to discuss the state of the market in the aftermath of the MCDC Initiative. Healthy discourse has been had over the issues of the means to enhance compliance by issuers with continuing disclosure undertakings.

B. Subsequent meetings for subgroups have been held on discreet topics.

C. Primarily the areas of focus include:

1. Leverage the financial statement auditor’s relationship with issuers as a means of reminding issuers of continuing disclosure obligations.

a. A 2014 Louisiana law11 requires public entities to keep records regarding continuing disclosure compliance and also requires the public entity’s auditor to review the public entity's compliance with the recordkeeping requirements, as well as a sample of the public entity's filings on EMMA to determine if such filings are in compliance with the continuing disclosure agreements to which the public entity is a party.

b. Issues presented include what the role of the auditor should be with respect to inquiring about or ascertaining compliance with continuing disclosure undertakings and whether a mechanism (voluntary or state law mandated) should be employed to have issuers certify or otherwise represent to the auditors (and the market) as to the status of their compliance with continuing disclosure undertakings.

2. Identify and recommend improvements to the EMMA system that will, among other things, address the structuring and organization of disclosure documents on EMMA to facilitate retrieval of relevant information and further enhance the email reminder function.

3. Request guidance from the SEC on questions of materiality of specific disclosure information.

a. Although the settlement agreements under MCDC list examples of continuing disclosure misstatements, the lack of context for these examples does not provide a basis for future use in determining what continuing disclosure failings should be disclosed under Rule 15c2-12.

11 A copy of the statute is attached as Appendix A.


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4. Request updated guidance from the SEC on amending continuing disclosure agreements.

a. MCDC highlighted the fact that disclosure practices evolve over time and older continuing disclosure agreements may require the production of information that is no longer relevant, available or easily produced.

b. The SEC in the “NABL 1” letter12 set out an amendment process that has been written into many (if not most) continuing disclosure undertakings, which has three conditions that must be satisfied:

(i) The amendment may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of the obligated person, or type of business conducted;

(ii) The undertaking, as amended, would have complied with the requirements of the rule at the time of the primary offering, after taking into account any amendments or interpretations of the rule, as well as any change in circumstances; and

(iii) The amendment does not materially impair the interests of holders, as determined either by parties unaffiliated with the issuer or obligated person (such as the trustee or bond counsel), or by approving vote of bondholders pursuant to the terms of the governing instrument at the time of the amendment.

c. The SEC staff anticipated, at the time, that undertakings would include a general description of the type of financial information and operating data that will be provided, rather than references to specific tables and other information. “These descriptions need not state more than a general category of financial information and operating data.”

d. It would facilitate the amendment process if the SEC staff would provide additional guidance that approves (or at least doesn’t disapprove) an amendment process designed to update the disclosure requirements set forth in older continuing disclosure undertakings so long as adequate notice is provided bondholders and the new requirements would be sufficient if the applicable bonds were being issued today (i.e. allowing the disclosure requirements to evolve as market requirements change).

V. Removing Road Blocks to Increased Voluntary (including Interim) Disclosure

A. In 2000, NABL issued a paper13 for use by its members in counseling clients regarding voluntary secondary market disclosure.

B. In 2013, NABL was part of a joint effort of a number of municipal market organizations to produce a paper regarding voluntary disclosure of bank loans.14

12 A copy of the NABL 1 Letter is attached as Appendix B. 13 A copy of this paper is included in Appendix C. 14 A copy of this paper is included in Appendix D.


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C. The 2012 SEC Report including many references to a desire to increase the amount and frequency of the delivery of information by municipal issuers to the secondary market.

D. Reluctance by municipal issuers to undertake consistent and frequent voluntary disclosure is likely tied to several factors:

1. “Out of sight, out of mind” or “fix it and forget it.” Municipal issuers may build into their procedures annual filings to satisfy contractual undertakings but the municipal market is not first and foremost on the list of entities and individuals that local administrators and finance officers are concerned about satisfying. Elected officials, senior administration and the local citizenry will always come first, other than in the midst of a bond issue. An infrequent issuer that issues only long term fixed rate debt may not recognize or appreciate the value of enhancing the flow of information to the secondary market. Voluntary disclosure over the course of a 30 year bond issue will not affect the amount of debt service to be paid and the relative value of the issuer’s bonds in the secondary market will not affect the financial position of the issuer.

2. Concern about increased exposure for securities liability. Information provided to the market by a municipal issuer will be subject to the anti-fraud provisions of the federal securities laws and this has stymied widespread voluntary disclosure programs by infrequent or smaller issuers, perhaps on the advice or counsel.

E. In order to increase voluntary disclosure, issuers who do not currently provide additional disclosure to the secondary market will need to be convinced of the importance of doing so and should be advised of ways in which such disclosure can be undertaken without exposing the issuer to unwarranted additional liability and may, under some circumstances, control the extent of information subject to anti-fraud laws.

F. Use of disclaimers on EMMA filings or “terms of use” pages on websites are not likely to be sufficient to insulate an issuer from liability.

G. Would a “safe harbor” for voluntary disclosure alleviate issuer/regulator concerns?

1. Development of market-accepted disclaimer language to use when posting voluntary information on EMMA.

2. Confirmation that compliance with disclosure policies and procedures would be sufficient to avoid a negligence charge by the SEC.

3. Acceptance by market participants of “terms of use” for web-based disclosure of interim financial and other information


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VI. How NABL Members can be part of the solution.

1. Talk to your clients about their existing or anticipated continuing disclosure requirements, including consideration of amendment to existing undertakings.

2. Encourage the adoption of a formal workable disclosure policy.

3. Make sure the issuer is provided a template for the tables and other information that is required to be updated.

4. Talk to your clients about additional voluntary disclosure of information already produced and distributed for other purposes.


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APPENDIX S-2 A

Appendix A


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2014 Louisiana Laws Revised Statutes TITLE 39 - Public Finance RS 39:1438 - Issuers of securities; continuing disclosure requirements; audit requirements Universal Citation: LA Rev Stat § 39:1438 §1438. Issuers of securities; continuing disclosure requirements; audit requirements A. Definitions. For purposes of this Section: (1) "Auditor" means the legislative auditor or any private accounting firm which prepares the annual financial audit of a public entity under rules of the legislative auditor regarding the audit of governmental entities, quasi-governmental entities, or entities otherwise subject to public audit by the legislative auditor. (2) "Continuing disclosure agreement" means any agreement entered into by an obligated person which sets forth the continuing disclosure obligations of such obligated person pursuant to the SEC rule. (3) "EMMA" means the Electronic Municipal Market Access system maintained by the Municipal Securities Rulemaking Board. (4) "Issuer" means any "issuer of municipal securities" as defined in the SEC rule. (5) "Municipal securities" means any securities which are issued by a public entity which are subject to continuing disclosure under the SEC rule. (6) "Obligated person" has the meaning defined in the SEC rule. (7) "Public entity" means the state, its agencies, departments, boards, commissions, parishes, municipalities, school boards, special districts, special authorities, and any other political subdivision or other entity created by any of the foregoing. (8) "SEC rule" means the municipal securities continuing disclosure rule of the United States Securities and Exchange Commission codified as Section 240.15c2-12 of Title 17 of the Code of Federal Regulations, together with all corresponding rules, updates, notices, and interpretations of the United States Securities and Exchange Commission and the Municipal Securities Rulemaking Board, as may be amended from time to time. B. Findings and purpose. The legislature recognizes that public entities often act as issuer or obligated persons of municipal securities and therefore are often subject to the SEC rule, which was established in order to provide municipal securities investors with more timely and transparent access to financial and other material information while such securities remain outstanding. The legislature finds that the continuing disclosure requirements of the SEC rule

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are in the public interest, and now desires to establish procedures to provide for compliance and audit with respect to municipal securities issued in the state. C. Recordkeeping. (1) Every public entity shall continuously maintain: (a) A list of all Louisiana municipal securities for which the public entity is the issuer or an obligated person. (b) A copy of all continuing disclosure agreements to which the public entity is a party. (c) If, pursuant to a continuing disclosure agreement to which the public entity is a party, the public entity is responsible for filing notices of changes in bond ratings, a list of current ratings for such securities, if any. (2) All records required to be kept by a public entity under this Section shall be subject to inspection by the public entity's auditor. D. Audit. As part of its annual financial audit of a public entity, a public entity's auditor shall: (1) Review the public entity's compliance with the recordkeeping requirements of this Section. (2) Review a sample of the public entity's filings on EMMA to determine if such filings are in compliance with the continuing disclosure agreements to which the public entity is a party. Acts 2014, No. 463, §1.

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