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HomeMy WebLinkAboutReso 23-16 Adopting the City of Morro Bay Disclosure PolicyRESOLUTION NO.2346 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF MORRO BAY, CALIFORNIA ADOPTING PUBLIC FINANCE DISCLOSURE AND PROCEDURES POLICY THE CITY COUNCIL City of Morro Bay, California WHEREAS, in April 1992, the City of Morro Bay ("City") entered into a water treatment and local facilities agreement with the San Luis Obispo County Flood Control and Water Conservation District ("District") for the purpose of treating the City's state water project allotment, and to provide for the financing of the local facilities (pipeline and water tank); and WHEREAS, pursuant to the above -mentioned agreement, the District contracted with the Central Coast Water Authority ("CCWA") to construct and operate a water treatment plant, and finance the construction of the local facilities; and WHEREAS, in 1992, the CCWA issued revenue bonds to finance the costs of developing a pipeline, water treatment plant and other local facilities; and WHEREAS, in 1996, the CCWA issued revenue bonds to advance refund the 1992 revenue bonds, and subsequently refunded the 1996 bonds in 2006; and .WHEREAS, the CCWA currently intends to refund the 2006 bonds to reduce interest costs and provide savings to member agencies, while maintaining the same maturity date of 10/1/2021 as was the case for the 1996 revenue bonds and the 2006 bonds; and WHEREAS, it is advantageous for the City at this time to adopt public finance disclosure policy and procedures (the "Public Finance Disclosure Policy and Procedures") to ensure the City complies with all applicable disclosure obligations and requirement under the federal securities laws with respect to disclosure obligations under the proposed CCWA refinancing, and additional public securities the City may issue in the future. NOW THEREFORE, BE IT RESOLVED by the City Council of the City of Morro Bay Resolution No. 23-16 is adopted, and the Public Finance Disclosure Policy and Procedures is approved. PASSED AND ADOPTED by the City Council of the City of Morro Bay at a regular meeting thereof held on the 12�' day of Apri12016, by the following vote: AYES: Irons, Headding, Johnson, Makowetski, Smukler NOES: None ABSENT: None J E L. IRONS, Ma or ATTEST: �4 ANA SWANSON, City Clerk Attachments: 1. Public Finance Disclosure Policy and Procedures CITY OF MORRO BAY PUBLIC FINANCE DISCLOSURE POLICY AND PROCEDURES The purpose of these Disclosure Procedures (the "Procedures") is to memorialize and communicate procedures in connection with obligations, including notes, bonds and certificates of participation, issued by or on behalf of the City of Morro Bay (the "City") so as to ensure that the City continues to comply with all applicable disclosure obligations and requirements under the federal securities laws. BACKGROUND The City from time to time issues bonds, notes or other obligations or causes certificates of participation to be executed and delivered (collectively, "Obligations") in order to fund or refund capital investments, other long-term programs and working capital needs. In offering Obligations to the public, and at other times when the City makes certain reports, the City must comply with the "anti -fraud rules" of federal securities laws. ("Anti -fraud rules" refers to Section 17 of the Securities Act of 1933 and Section 10(b) of the Securities and Exchange Act of 1934, and regulations adopted by the Securities and Exchange Commission under those Acts, particularly "Rule l0b-5" under the Securities and Exchange Act of 1934.) The core requirement of these rules is that potential investors in Obligations must be provided with all "material" information relating to the offered Obligations. The information provided to investors must not contain any material misstatements, and the City must not omit material information which would be necessary to provide to investors a complete and transparent description of the Obligations and the City's financial condition. In the context of the sale of securities, a fact is generally considered to be "material" if there is a substantial likelihood that a reasonable investor would consider it to be important in determining whether or not to purchase the securities being offered. When Obligations are offered, the two central disclosure documents which are prepared are a preliminary official statement ("POS") and a final official statement ("OS", and collectively with the ?OS, "Official Statement"). The Official Statement generally consists of (i) the forepart (which describes the specific transaction including maturity dates, interest rates, redemption provisions, the specific type of financing, the leased_ premises (in certificate of participation financings) and other matters particular to the financing, (ii) a section which provides information on the City, including its financial condition as well as certain operating information ("City Section"), and (iii) various other appendices, including the City's audited financial report, form of the proposed legal opinion, and form of continuing disclosure undertaking. Investors use the Official Statement as one of their primary resources for making informed investment decisions regarding the Obligations. DISCLOSIRE PROCESS When the City determines to issue Obligations directly, the City's Administrative Services Director requests the involved departments to commence preparation of the portions of the Official Statement (including particularly the City Section) for which they are responsible. While the general format and content of the Official Statement may not normally change substantially from offering to offering, except as necessary to reflect major events, the City's Administrative Services Director and other relevant staff are responsible for reviewing and preparing or updating certain portions of the City Section which are within their particular areas of knowledge. Once the draft POS has been substantially o1181.0007i285817.1 updated, the entire draft PUS is shared with the City Manager for review and input. Additionally, all participants in the disclosure process are separately responsible for reviewing the entire draft POS. Members of Lite financing team, including the Bond Counsel, Disclosure Counsel (where applicable), and a financial advisor, if one is engaged with respect to the Obligations (the "Financial Advisor"), assist staff in determining the materiality of any particular item, and in the development of specific language in the City Section. Members of the financing team also assist the City in the development of a "big picture" overview of the City's financial condition, included in the City section. This overview highlights particular areas of concern. Bond Counsel and Disclosure Counsel have a confidential, attorney -client relationship with officials and staff of the City. The Administrative Services Director or a member of the financing team at the direction thereof schedules one or more meetings or conference calls of the financing team (which includes City officials, the City Attorney, Bond Counsel, Disclosure Counsel (where applicable), and the City's Financial Advisor (and the underwriters of the Obligations, and the underwriters' counsel, if the proposed financing is being undertaken as a negotiated transaction)), and new drafts of the forepart of the draft POS and the City Section are circulated and discussed. Such communications may occur via electronic means rather than by meetings or conference calls. During this part of the process, there is substantial contact among City staff and other members of the financing team to discuss issues which may arise, determine the materiality of particular items and ascertain the prominence in which the items should be disclosed. Prior to distributing a POS to potential investors, there is typically a formal conference call which includes City officials involved in the preparation of the POS and members of the financing team (and the underwriters and the underwriters' counsel, if the financing is a negotiated transaction) during which the POS is reviewed in its entirety to obtain final comments and to allow the underwriters, if any, to ask questions of the City's senior officials. This is referred to as a "due diligence" meeting. A substantially final form of the POS is provided to the City Council in advance of approval to afford such City Council an opportunity to review the POS, ask questions and make comments. This draft POS will be presented to the City Council in a noticed agenda item at a regular or special meeting. The substantially final form of the POS is approved by the City Council which generally authorizes certain senior staff to make additional corrections, changes and updates to the POS in consultation with Bond Counsel, Disclosure Counsel (if applicable), and the City Attorney, if necessary. At the time the POS is posted for review by potential investors, senior City officials execute certificates deeming certain portions of the POS complete (except for certain pricing terms) as required by SEC Rule 15c2-12. Between the posting of the POS for review by potential investors and delivery of the final OS to the underwriter for redelivery to actual investors in the Obligations, any changes and developments will have been incorporated into the POS, including particularly the City Section, if required. If necessary to reflect developments following publication of the POS or OS, as applicable, supplements will be prepared and published. In connection with the closing of the transaction, one or more senior City officials execute certificates stating that certain portions of the OS, as of the date of each OS and as of the date of closing, does not contain any untrue statement of material fact or omit to state any material fact necessary to make the statements contained in the Official Statement in light of the circumstances under which they were made, not misleading. oiisi.000�izassi�.l 2 CITY SECTION The information contained in the City Section is developed by personnel under the direction of the Administrative Services Director, with the assistance of the financing team. In certain circumstances, additional officials will be involved, as necessary. The following principles govern the work of the respective staffs that contribute information to the City Section: • City staff involved in the disclosure process are responsible for being familiar with its responsibilities under federal securities laws as described above. • City staff involved in the disclosure process should err on the side of raising issues when preparing or reviewing information for disclosure. Officials and staff are encouraged to consult Bond Counsel, Disclosure Counsel (if applicable), the City Attorney, or members of the financing team if there are questions regarding whether an issue is material or not. • Care should be taken not to shortcut or eliminate any steps outlined in the Procedures on an ad hoc basis. However, the Procedures are not necessarily intended to be a rigid list of procedural requirements, but instead to provide guidelines for disclosure review. If warranted, based on experience during financings or because of additional SEC pronouncements or other reasons, the City should consider revisions to the Procedures. • The process of updating the City Section from transaction to transaction should not be viewed as being limited to updating tables and numerical information. While it is not anticipated that there will be major changes in the form and content of the City Section at the time of each update, everyone involved in the process should consider the need for revisions in the form, content and tone of the sections for which they are responsible at the time of each update. • The City must make sure that the staff involved in the disclosure process is of sufficient seniority SUCH that it is reasonable to believe that, collectively, they are in possession of material information relating to the City, its operations and its finances. JOINT POWERS AGENCY FINANCINGS The City is a member of various joint powers agencies. These joint powers agencies finance or refmance facilities from time to time. In connections with such financings and refinancings, these joint powers agencies may prepare offering documents which include information provided by the City which constitutes a City Section as discussed above. These Procedures apply to City Sections prepared in connection with such joint powers agency financings and refinancings. Periodic training for the staff involved in the preparation of the Official Statement (including the City Section) is coordinated by the finance team and the Administrative Services Director. These training sessions are provided to assist staff members involved in identifying relevant disclosure information to be included in the City Section. The training sessions also provide an overview of federal laws relating to disclosure, situations in which disclosure rules apply, the purpose of the Official Statement and the City Section, a description of previous SEC enforcement actions and a discussion of recent developments in the area of municipal disclosure. Attendees at the training sessions are provided the opportunity to ask questions of finance team members, including Bond Counsel concerning disclosure obligations and are encouraged to contact members of the finance team at any time if they have questions. of Isi.0007iasssi7.i 3 ANNUAL CONTINUING DISCLOSURE IIM HI EMENTS In connection with the issuance or execution and delivery of Obligations, the City will be required to enter into contractual agreements ("Continuing Disclosure Undertakings") to provide annual reports related to its financial condition (including its audited financial statements) as well as notice of certain events relating to the Obligations specified in the Continuing Disclosure Undertakings. The City must comply with the specific requirements of each Continuing Disclosure Undertaking. The City's Continuing Disclosure Undertakings will generally require that the annual reports be filed within 270 days after the end of the City's fiscal year, and material event notices are generally required to be filed within 10 business days of their occurrence. Specific events which require "material event" notices are set forth in each particular Continuing Disclosure Certificate. The Administrative Services Director shall be responsible for preparing and filing the annual reports and material event notices required pursuant to the Continuing Disclosure Undertakings. Particular care shall be paid to the timely filing of any changes in credit ratings on Obligations (including changes resulting from changes in the credit ratings of insurers of particular Obligations).