Debt Policy Sample - WPTA



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Debt

Policy

Certification

Program

Resource Library

Guidelines for the use of the Resource Library

The following provides guidelines in the use of the Resource Library for the development of your entity's debt policy.

General Guidelines

This Resource Library is intended to provide sample language for the various sections of the debt policy. Note that the language may be supplemental or alternative to the language in the Sample Debt Policy. As the debt policy should reflect the unique nature and circumstances of your entity, not all of the sample language may be suitable or applicable.

Please note that the Sample Debt Policy is not a one-size-fits-all, and should be used only as a guide in the development of your debt policies. The polices – and the text to include -- would need to be tailored and focused on your entity’s needs, taking into account the size and complexity of your entity.

In the end, it is important that the policies establish are suited to your entity, and can be carried out on a routine and ongoing basis. The sample language is included under the following seven sections – to correspond to the section headings in the Sample Debt Policy:

I. Introduction

II. Governing Principles

III. Roles and Responsibilities

IV. Professional Services

V. Transaction-Specific Policies

VI. Compliance Polices

VII. Other Policies

Table of Contents

Section I. Introduction 1

Section II. Governing Principles 1

Section III. Roles and Responsibilities 4

Section IV. Professional Services 5

Section V. Transaction-Specific Policies 13

Section VI. Compliance Policies 13

Section VII. Other Policies 16

Section I. Introduction

{See Sample Debt Policy”}

Section II. Governing Principles

Permitted Debt by Type

Subject to changes in state laws, the Issuer may legally issue debt using only the debt instruments described below:

Unlimited Tax General Obligation Bonds – The Issuer is authorized to issue Unlimited Tax General Obligation Bonds under chapter ____ RCW, subject to the approval of the Legislative Authority and approval of the voters within the jurisdiction of the Issuer as required by law.

Limited [Tax] General Obligation Bonds – The Issuer is authorized to issue Limited [Tax] General Obligation Bonds under chapter ____ RCW, subject to the approval of the Legislative Authority. [Note that school districts use LGO bonds and most, if not all, others use LTGO bonds.]

Revenue Bonds – {e.g. enterprise revenue bonds or lease revenue bonds} The Issuer is authorized to issue Revenue Bonds under chapter(s) ____ RCW, subject to the approval of the Legislative Authority.

Special Assessment Bonds – The Issuer is authorized to issue [Local Improvement District] [Utility Local Improvement District] [Road Improvement District] Bonds under chapter(s) ____ RCW, subject to the approval of the Legislative Authority after appropriate formation of a special assessment district. [Note that this authority will only apply to certain entities, where specific authority is provided.]

Short Term Debt – The Issuer is authorized to issue short term debt, including notes or other evidences of indebtedness under chapter 39.50 RCW, subject to the approval of the Legislative Authority.

Local Option Capital Asset Lending (LOCAL) Program Debt – The Issuer is authorized to enter into a financing contract with the Office of the State Treasurer under chapter 39.94 RCW, subject to the approval of the Legislative Authority. [Note that the LOCAL program is available only to those entities who levy a property tax and have general obligation debt authority. Also note that LOCAL borrowing represents a general obligation of the Issuer.]

{Variable Rate Debt[1] – The Issuer is authorized to issue variable rate debt, subject to the approval of the Legislative Authority. The Issuer recognizes that variable rate exposure carries inherent risks not present in traditional fixed-rate transactions. Among them are:

• Interest rate risk – the risk that the Issuer will be exposed to rising interest rates.

• Remarketing risk / put risk – the risk that the remarketing agent is unable to find purchasers for the tendered securities – resulting in the payment of a higher interest rate to the liquidity provider (or, if self-liquidity, having to draw against current funds).

• Renewal risk – the risk of the inability to obtain a suitable liquidity facility at an acceptable price to replace a facility upon termination or expiration of the contract period.

• Credit risk – the risk of Issuer rating of deterioration impacting the ability to access the variable rate debt and liquidity markets efficiently.

No variable rate debt will be issued without formalizing the objectives to be achieved, permitted instruments, amounts that may be issued, steps to minimize risk, and monitoring and reporting requirements.

To minimize risk with variable rate debt, total amount of variable rate debt shall not exceed [10] % of total debt {up to 25% may be okay – check with your advisors}. No variable rate debt shall be utilized without an analysis by an independent municipal advisor.}

{Alternative text A.: “No variable rate debt will be utilized until after adoption of a variable rate policy by the Legislative Authority. No variable rate debt shall be utilized without an analysis by an independent municipal advisor.”}

{Alternative text B.: “No variable rate debt will be utilized until after adoption of variable rate policy by the Legislative Authority, unless otherwise justified in writing to the Legislative Authority.” And/or “No variable rate debt shall be utilized without an analysis by an independent municipal advisor.”}

Purpose for Borrowing

The Issuer shall issue long-term debt solely for the purpose of financing the cost of design, acquisition and/or construction of long-lived capital projects [alternative language: “major infrastructure assets” or “implementation of capital plans” or similar] {defined in a Capital Facilities Plan, when applicable}, or to refund outstanding debt {Add other purposes if needed}.

{Unlimited Tax General Obligation Bonds – The Issuer shall use Unlimited Tax General Obligation Bonds, which require voter approval, for capital purposes.

Limited [Tax] General Obligation Bonds – The Issuer shall use Limited [Tax] General Obligation Bonds for the purpose of financing projects of general benefit to the Legislative Authority, for which an annual payment source has been identified …

Revenue Bonds – The Issuer shall use Revenue Bonds for the purpose of funding cost of improvements relating to enterprise systems, when it is expected that the enterprise is of sufficient size and financial stability to support debt repayment. Special Assessment Bonds – The Issuer shall use Special Assessment Bonds for the purpose of financing projects that specially benefit a limited number of property owners, the special benefit will equal or exceed the cost to each owner, and [the related property owners submit a petition to the City relating thereto] [and the Legislative Body has approved an {Ordinance/Resolution} relating thereto]

Short Term Debt – The Issuer shall use Short Term Debt for the purpose of [financing projects with a short useful life, or in anticipation of specifically identified revenue, including taxes or proceeds of grants.]

{Interim Financings – The Issuer may use Interim Financings to provide cash flow for projects (including construction and/or acquisition), anticipated to be paid from proceeds of a future financing.}

Local Option Capital Asset Lending (LOCAL) Program Debt – The Issuer shall use LOCAL Program Debt for the purpose of …

Limitations on Debt Issuance

Legal Debt Limits – General obligation debt is constitutionally and statutorily limited to an indebtedness amount not exceeding [depends upon your entity, sample language included below]:

a) ____% of the value of the taxable property (i.e., assessed valuation), without voter approval; and

b) ____% of the value of the taxable property, for total outstanding general obligation debt, including non-voted debt and bonds issued with the assent of 60% of the voters voting at an election held for that purpose, where the total number of voters casting ballots at the election is not be less than 40% of the number of votes cast in the last state general election (RCW 39.36.020 and ________).

For purposes of calculating legal debt limits, the amount of “general obligation” indebtedness is calculated by including:

a) General Obligation Bonds (Voted and Non-voted), including bond anticipation notes which are to be paid off with the proceeds of the bonds. Interest is included only if it has matured and is due and payable.

b) For deep discount debt (e.g., zero coupon bonds), the face amount of the bond.

c) Registered warrants issued against the general (current expense) or other tax supported funds.

d) Lines of credit, to the extent they are drawn upon.

e) Executory conditional sales or installment sales contracts pledging the full faith and credit of the taxing district. (RCW 39.30.010).

f) Other obligations of the general or other tax supported funds, except for loan agreements (statutory limit only) with agencies of the state of Washington or the United States of America. (RCW 39.36.060 and 39.69.020).

g) Capital leases [including LOCAL loans], principal only (RCW 35.42.200).

In calculating the Issuer’s legal debt limit, the Issuer will consult with its legal [or municipal] advisors to determine whether particular obligations are to be treated as debt within the statutory and constitutional limits.

{Debt Limit Policy Cap -- The Issuer shall not exceed ___ % of the legal debt limits from above.}

{Short-Term Debt Policy Cap – The Issuer’s short-term debt shall not exceed ____% of its total debt.}

{Variable Rate Debt Policy Cap – The Issuer’s variable rate debt shall not exceed [10][25]% of its total debt.} {This cap could be included under a separate variable rate section}.

{Revenue Bond / Other Cap –…}

Section III. Roles and Responsibilities

[Finance Committee/Debt Committee/Finance Director/Other (“Responsible Unit” is used below)] - The primary responsibility for debt management rests with the Responsible Unit. The Responsible Unit shall be responsible for the following tasks: {Consider numbering each item}. {Note that these tasks may be allocated among multiple parties if appropriate to the entity}

A) Overall Management of Debt:

✓ Provide oversight for a bond sale, including appropriate review and approval of the disclosure documents (Preliminary and final Official Statements);

✓ In consultation with the Issuer's counsel, municipal advisor, and bond counsel determine the most appropriate debt instrument for a proposed sale;

✓ Provide for the issuance of debt at the lowest possible cost and risk;

✓ Determine and manage the available debt capacity; inform the Legislative Authority of the debt capacity;

✓ Provide for the issuance of debt at appropriate intervals and in reasonable amounts as required to fund approved capital [and other] expenditures;

✓ Approve appointment of any professionals associated with the issuance of debt, [if not included under “Legislative Authority”];

✓ Monitor opportunities to refund debt and recommend such refunding as appropriate;

✓ Provide for the timely payment of principal of and interest on all debt; ensure that the fiscal agent receives funds for payment of debt service on or before the payment date;

✓ Comply with all terms, conditions and disclosure required by the legal documents governing the debt issued;

✓ Provide for the distribution of pertinent information to rating agencies;

✓ Maintain a current [database] [electronic file] with all outstanding debt; and

✓ Apply and promote prudent fiscal practices.

B) Debt Issuance:

✓ Submit to the Legislative Authority all recommendations to issue debt;

✓ Recommend to the Legislative Authority the type of debt to be issued;

✓ Recommend to the Legislative Authority the manner of sale of debt;

✓ Together with Bond Counsel help draft an authorizing ordinance/resolution to be submitted to the Legislative Authority to authorize debt and establishing parameters for the issuance and sale of such obligations;

✓ Develop a financing structure for a particular bond issue that minimizes the cost and risk to the Issuer, within the parameters set by the authorizing ordinance/resolution; and

✓ Provide for and participate in the preparation and review of offering and disclosure documents.

C) Post-Issuance:

✓ Develop and implement procedures to ensure compliance with all applicable provisions of the U.S. Tax Code and Securities Laws [including compliance checklist];

✓ Develop and implement procedures to ensure compliance with the Issuer’s continuing disclosure undertakings [including compliance checklist]; and

✓ Provide to the MSRB annual disclosure reports and notices regarding the occurrence of certain events specified in the Issuer’s continuing disclosure undertakings.

Section IV. Professional Services

Professional Services

The Issuer shall procure professional services as required to execute financing transactions and to advise on non-transaction related work. Professional services may be provided by Municipal Advisor, Legal Counsel (Bond, Disclosure, and/or Tax Counsel), underwriters, and other service providers such as rating agencies, trustees or escrow agents, verification agents, printers, arbitrage rebate calculation firms, bidding agents, and credit enhancement providers.

Selection Process - The selection of financial and legal professionals to assist the Issuer in carrying out financing programs must be consistent with procurement procedures that may be required by federal, state or local law, or by local policy. If not required by federal, state or local law or policy, the Issuer shall use [or “may elect to use”] a competitive bid process involving a Request for Proposals (RFP), {Request for Qualifications (RFQ),} or similar document. [Alternatively, could refer to the procurement manual/policies: “- The selection of financial and legal professionals to assist the Issuer in carrying out financing programs must be consistent with procurement procedures specified by the procurement manual [polices].”]

If a RFP process, respondents shall be required [alternative text: “are typically asked”] to disclose the following general information in their proposals, in addition to specific questions relating to the professionals’ field (as outlined below):

✓ Names of any persons or firms, including but not limited to, attorneys, lobbyists, and public relations firms that they engaged to promote their selection by the Issuer;

✓ Names of any persons or firms from whom they received or may receive, directly or indirectly, any remuneration arising out of or relating in any way to their relationship with the Issuer, including but not limited to remuneration for promoting such persons or firms for selection by the Issuer; and

✓ The existence and nature of any agreements by and between themselves and any other professionals that relate to a particular Issuer financing or to the Issuer’s financing programs in general.

Appointment of Municipal Advisor / Financial Advisor (“Municipal Advisor”)[2] The Issuer [“will”] [optionally “may” if “sufficient in-house expertise and access to the current bond market”1] select a municipal advisor (or advisors) to assist in the issuance and administration of all debt. The firm(s) appointed as municipal advisor will provide a full range of advisory services in connection with the Issuer’s financing programs and must be a duly registered Municipal Advisor under applicable Securities and Exchange Commission (SEC) and Municipal Securities Rulemaking Board (MSRB) rules.

[Specifically, the scope of services provided by the municipal advisor(s) may include, but is not limited to, the following transaction-specific and ongoing advisory services:

…]

{Below are some transaction-specific advisory services and ongoing advisory services that may be provided by a municipal advisor(s). What to include above, if any, will depend upon the unique nature and circumstances of your entity. Note that not all of the sample language may be suitable or applicable.

✓ Recommend financing structure, and specific covenants and other terms of the authorizing ordinance or resolution, including call provisions in relation to current market conditions and complexity of financing.

✓ Participate in the preparation of [Prepare] preliminary and final official statements, including the official notice of sale, for accuracy and adequacy of disclosure.

✓ Review financing related aspects of various contracts, as necessary, if any {,including: a) bond purchase contracts, b) liquidity facility agreements, c) remarketing agreements, and d) investment agreements}.

✓ Review [Resolution/Ordinance] concerning the authorization and award of the financing.

✓ Prepare and review advertisements of sales in published and electronic media, if any.

✓ Assist the Issuer in developing and presenting information to rating agencies, investors and other municipal market participants.

✓ Assist the Issuer in developing financing alternatives.

✓ Attend meetings of the Issuer relating to financial issues affecting the financing.

✓ Provide assistance in determining whether the financing should be sold competitively or through a negotiated sale, or by direct placement with a bank or other investor.

✓ For competitive sales, assist the Issuer with the bid parameters and other terms for the notice of sale, verification of bids, determine compliance with financing terms and conditions, and recommend acceptance or rejection of bids.

✓ For negotiated sales, provide advice during the sale process to assure that the proposed coupon interest rates and yields reflect current market conditions, comparable sales, and desired optionality, and that underwriting compensation is reasonable.

✓ For direct placements, advise relative to the solicitation and assist in the evaluation of proposals from potential purchasers.

✓ Provide assistance with the preparation and evaluation of RFPs for financial services, as appropriate, including underwriting, trustee or escrow agent services, escrow verification, {credit enhancement, liquidity facility, and derivative products (if permitted by state law)}.

✓ Provide assistance with the closing and delivery of securities.

✓ Provide post sale analysis, including an issue summary and Final Report for the financing.

✓ Provide calendars for upcoming issues and distribution lists that specify the names and contact information for parties working on a particular transaction.

✓ Assist the Issuer with any other financing matters relating to issuance that may be identified during a transaction, including preparing and reviewing set-up with electronic bid providers and escrow verification services.

✓ Advise relative to selection of firms to provide investment of proceeds and reserves, and bidding out escrow services, as applicable.

✓ Provide advice regarding the administration of the Issuer’s debt program and recommendations for legislative and other operational modifications, as requested.

✓ Monitor the Issuer’s outstanding obligations, and identify refunding opportunities.

✓ Assist in the review and analysis of state and federal legislation pertaining to the Issuer’s financing programs.

✓ Evaluate proposals on new products and other financing ideas received from underwriters, or other municipal market participants.

✓ Assist the Issuer in special projects relating to debt issuance and debt management, as assigned.

✓ Provide other services as are requested by the Issuer.]

{Alternatively, if the scope services are limited to bond pricing services: “The firm(s) selected as municipal advisor will provide bond pricing services in connection with the Issuer’s financings and must be a duly registered Municipal Advisor under applicable MSRB rules. The scope of services may include, but not be limited to, the following:

1. Review and evaluate reasonableness of underwriter compensation;

2. Analyze and recommend pricing levels based on historical pricings and the pricing of comparable credits in the then current municipal bond market, and desired optionality;

3. Participate in all pricing discussions; and

4. Prepare post-financing review of pricing relative to market indices and comparables.”}

[The following criteria, not listed in order of significance, will [should /may] be used to evaluate proposals.

✓ Compliance with RFP requirements (if a RFP process is used);

✓ Firm’s qualifications and experience in providing required services;

✓ Qualifications and relevant experience of personnel assigned;

✓ References; and

✓ Cost of services.

These criteria, combined with information obtained from interviews, and other sources, if any, will be used to determine the successful municipal advisor(s).]

[Unless otherwise justified, the fees paid to municipal advisors shall be on an hourly or retainer basis. Unless otherwise justified, no fees shall be contingent on the sale of bonds or dependent upon the amounts of bonds sold.]

[If applicable,] The Responsible Unit shall submit to the Legislative Authority a recommendation for the appointment of Municipal Advisor(s). [If applicable,] The recommendation shall be accompanied by an evaluation of options and a justification for the recommended course of action.]

Appointment of Bond Counsel[3]. (“Bond Counsel”). - Bond Counsel renders an opinion on the validity of an offering, the security for the offering, and whether and to what extent interest is exempt from income taxation.

All debt issued by the Issuer shall be accompanied by a written opinion by legal counsel affirming that the Issuer is authorized to issue the proposed debt, that the Issuer has met all federal, state, and local legal requirements necessary for issuance and, where applicable, a determination of the proposed debt’s federal income tax status. This approving opinion and other documents relating to the issuance of debt shall be prepared by a nationally recognized legal firm with extensive experience in public finance and tax issues.

Unless otherwise justified, the appointment will be made from among nationally recognized law firms with significant operations in Washington State and experience with Washington State law.

The firm selected as Bond Counsel may be engaged to provide the full range of legal services required in connection with a) the successful issuance and delivery of particular bond issues ("Bonds") and b) on-going legal services for the Issuer financing programs, including advising the Issuer on compliance with regulatory requirements. [The scope of services may include, but not be limited to, the following:

…]

{Below are some services for issuance and delivery of bonds and ongoing legal services that may be provided by a bond counsel What to include above, if any, will depend upon the unique nature and circumstances of your entity. Note that not all of the sample language may be suitable or applicable.

A) Services for Issuance and Delivery of Bonds:

✓ Render Legal Opinion(s). The Bond Counsel will render the bond counsel opinion regarding the validity and binding effect of the bonds, the source of payment and security for the bonds, and, if applicable, the excludability of interest on the bonds from gross income for federal income tax purposes.

✓ Prepare and Review Documents. The Bond Counsel will prepare and review the documents necessary or appropriate to the authorization, issuance, sale, and delivery of the bonds, coordination of the authorization and execution of these documents -- including authorizing and awarding/sales [Resolutions/Ordinances].

✓ Review Legal Structure of the Bonds. The Bond Counsel will review all legal issues relating to the financing structure of the bonds.

✓ [Prepare/Review] Offering Document(s). The Bond Counsel will [prepare/review] those sections of the offering document(s) to be disseminated in connection with the sale of the bonds that relate to the bonds, financing documents, bond counsel opinion, tax matters, and the continuing disclosure undertaking of the Issuer.

✓ Assist with Presentations. The Bond Counsel will assist, as necessary, the Issuer in presenting information to a) bond rating organizations, b) investors, and, where appropriate, c) other municipal market participants relating to legal issues affecting the issuance of the bonds.

✓ Participate in Meetings. The Bond Counsel will participate in meetings, as requested, relating to legal issues affecting the issuance of the bonds, including, but not limited to a) Legislative Authority meetings, b) due diligence meetings, and c) sale of bonds.

✓ Review or Prepare Contracts. The Bond Counsel will review or prepare contracts, as necessary, if any, including: a) bond purchase contracts {, b) liquidity facility agreements, c) remarketing agreements, and d) investment and trust agreements,} relating to legal issues affecting the issuance of the bonds. The Bond Counsel will review, as necessary, other documents, relating to legal issues affecting the issuance of the bonds.

✓ Prepare Official Transcript. The Bond Counsel will prepare [bound and] [or] CD-ROM [or other electronic] official transcripts of the proceedings of the financing, including all documentation relating to the authorization, offering, sale and delivery of the issue.

✓ Assist in Other Legal Matters. The Bond Counsel will assist the Issuer with other legal matters relating to issuance of the bonds that may be identified during a transaction, including investment of proceeds and reserves and compliance with federal arbitrage regulations.

B) On-Going Legal Services [Depends upon the type of engagement]

✓ Tax Advice. The Bond Counsel will provide advice regarding actions that may be necessary to ensure that interest on tax-exempt bonds will continue to be tax-exempt [or will continue to be eligible for tax-advantaged treatment (i.e., tax credit subsidy bonds)].

✓ Regulatory Efforts. The Bond Counsel will generally monitor and inform the Issuer about proposed initiatives and rulings issued by federal regulatory agencies, including, but not limited to, IRS, SEC, and MSRB, that may impact the issuance of bonds

✓ Continuing Disclosure. The Bond Counsel will advise the Issuer in planning for the continuing disclosure efforts and in preparing continuing disclosure documents.

✓ Request for Proposals. The Bond Counsel will assist with the preparation and evaluation of RFPs for financial services, relating to legal issues affecting the issuance of bonds.

✓ Additional Legal Services.}

[If applicable,] The [General Counsel/Prosecutor/City Attorney/City Manager/Responsible Unit/Other (“General Counsel” is used below)] shall submit to the Legislative Authority [or Applicable Executive Officer] a recommendation for the appointment or when deemed appropriate reappointment of Bond Counsel(s). [If applicable,] The recommendation shall be accompanied by an evaluation of options and a justification for the recommended course of action. The General Counsel shall monitor the services rendered by the Bond Counsel(s).

A Bond Counsel under contract with the Issuer will not simultaneously represent any other party involved in the Issuer's financing, unless written dual representation conflict waiver is expressly obtained from the Issuer.

{Appointment of Disclosure Counsel (“Disclosure Counsel”). – [If these functions are not included under another section]. In order to comply with federal securities laws in connection with disclosure to investors the Issuer shall retain the services of a Disclosure Counsel. The Disclosure Counsel shall provide a) advice on issuer disclosure obligations and b) prepare the official statements and continuing disclosure agreements…}

{Appointment of Letter of Credit or Liquidity Facility Provider – In order to comply with the requirements of the bond documents and to ensure the liquidity and marketability of the Issuer’s publicly remarketed variable rate debt, the Responsible Unit may procure a letter of credit, standby bond purchase agreement, or line of credit in support of such variable rate debt. The selection of a letter of credit/liquidity bank shall be based on a competitive evaluation of proposals submitted in response to a Request for Proposals.

Criteria to be used in the appointment of a bank to provide a liquidity facility shall include, but not be limited to:

✓ The short and long-term credit ratings of the bank;

✓ Experience providing liquidity facilities to municipal bond issuers;

✓ Competitiveness of facility fees, interest charged on liquidity draws, maximum legal and administrative fees;

✓ Ability to agree to the Issuer's legal terms and conditions; and

✓ Trading value of the bank in the current market.

The Responsible Unit shall submit to the Legislative Authority a recommendation for the appointment of a Letter of Credit/Liquidity Facility provider. The recommendation shall be accompanied by an evaluation of options and a justification for the recommended course of action. The Responsible Unit shall monitor the trading value and credit ratings of the provider.}

Appointment of Escrow Verification Agent – In conjunction with the sale of [advance] refunding bonds, the Responsible Unit shall procure the services of a verification agent. The purpose of the escrow verification agent is to (a) verify the mathematical calculations confirming that the governmental obligations and cash deposited in the refunding escrow will be sufficient to provide for the timely repayment of principal and interest on the bonds being refunded and (b) the yield on the escrowed securities and the arbitrage yield on refunding bonds for the purposes of bond counsel’s tax opinion, as it relates to the issuance of tax-exempt advance refunding bonds. [In selecting an Escrow Verification Agent, the Responsible Unit may seek advice from bond counsel, municipal advisor, or other, as applicable.]

[Selection criteria shall include, but not be limited to:

✓ Demonstrated ability to provide accurate verification of escrow funding accuracy;

✓ Demonstrated ability to provide timely reports; and

✓ Competitiveness of fees.]

Appointment of Underwriters[4] - If a negotiated sale is approved under Section IV below, the Responsible Unit shall select an underwriter(s). The primary role of the underwriter in a negotiated sale is to market the debt to investors and purchase the debt from the Issuer. The selection of underwriters shall [may] {note that GFOA recommends the use of a RFP4} be based upon a competitive evaluation of proposals submitted in response to a Request for Proposals.

[Criteria used in the appointment of qualified underwriters shall include, but not be limited to:

✓ Demonstrated ability serving on financial transactions with similar complexity to the transaction being planned;

✓ Demonstrated ability to structure a debt issue efficiently and effectively;

✓ Demonstrated ability to sell debt to institutional and retail investors;

✓ Demonstrated ability to put capital at risk;

✓ Experience and reputation of assigned personnel; and

✓ Fees and expenses.]

Respondents shall present in their proposal [alternative text: “Prior to starting work on a particular financing, the underwriter shall provide”] a complete and detailed list of all proposed fees and expenses, including, but not limited to takedown, management fees, , and itemized not-to-exceed underwriting expenses to be paid by the Issuer. [The underwriting expense component must be discussed/reviewed by the Responsible Unit on or before the day of pricing and finalized and approved on the day of pricing.]

The Responsible Unit with assistance from the independent municipal advisor if applicable, shall monitor the services rendered by the underwriter(s).

Appointment of Escrow Agent – The Responsible Unit shall, when deemed necessary or when required for refunding or defeasance transactions, procure the services of an escrow agent. The purpose of the escrow agent is to hold in trust the securities and/or funds that are to be paid out for the purposes and upon compliance with the conditions specified in an escrow agreement. If SLGS securities are to be used, the escrow agent will subscribe for and purchase those securities.

[In selecting an Escrow Agent, the Responsible Unit may seek advice from bond counsel, municipal advisor, or other.]

Appointment of Arbitrage Rebate Calculation Firm – The Responsible Unit shall, when deemed necessary or when required, procure the services of an arbitrage rebate calculation firm. The purpose of the arbitrage rebate calculation firm is to provide arbitrage rebate compliance services in accordance with the Internal Revenue Code of 1986, as amended (“Code”).

{The selection of an arbitrage rebate calculation firm shall be based upon a competitive evaluation of proposals submitted in response to a Request for Proposals. The scope of services may include, but not be limited to, the following:

✓ Determine if the requirements of a spending exception to the rebate requirement applicable to a debt issue have been met;

✓ Prepare interim rebate calculations not later than as of the fifth anniversary of the issue date and at five-year intervals thereafter, if the requirements for a spending exception are not met;

✓ Prepare a final rebate calculation as of the date of the early redemption or final retirement of all of the outstanding obligations of the issue, as needed to determine the final rebate amount to be paid to the United States under the Code;

✓ Prepare computations if unspent proceeds remain following the expiration of the initial temporary period as described in the federal arbitrage regulations, as needed to determine if any yield reduction payments are required with respect to investments of those unspent proceeds; and

✓ Consult with the Responsible Unit as requested concerning arbitrage regulations and related issues including control procedures and industry practices.}

[Criteria used in the appointment of qualified arbitrage rebate calculation firm shall include, but not be limited to:

✓ Firm’s qualifications and experience in providing arbitrage rebate calculation services;

✓ Staff qualifications, tax expertise, and experience;

✓ Demonstrated ability to provide timely reports; and

✓ Cost of services.]

[In selecting an Arbitrage Rebate Calculation Firm, the Responsible Unit may seek advice from bond counsel and/or Municipal Advisor.]

Section V. Transaction-Specific Policies

{Below is sample language for “Private Placement / Direct Purchase / Bank Loan[5]” not included in the Debt Policy}

{Private Placement / Direct Purchase / Bank Loan5 – The Issuer {shall not] [may] sell debt through private placement / direct purchase / bank loan.

[Alternative text: “When deemed appropriate to minimize the costs and risks of Issuer's debt issue, including to facilitate a debt issuance of small size or having other characteristics which may cause the debt issuance to be less suited to sale in a public offering, whether by competitive bid or negotiated sale, the Responsible Unit will submit to the Legislative Authority a request to sell the debt issue through private placement / direct purchase / bank loan.”]

[If direct purchase / bank loan is authorized, the Issuer shall seek several proposals. The RFP, developed with the help of a municipal advisor, shall include a term sheet, requesting quotes for financing alternatives consistent with the Legislative Authority’s goals. The proposers’ a) fees and rates, b) terms and structure, and c) acceptance of the terms and conditions of the Issuer may be a factor in evaluating the proposals].

[Please consult with bond counsel before including the following sentence: “If private placement / direct purchase / bank loan is authorized, the Issuer shall voluntarily disclose information about private placement / direct purchase / bank loan using the same standards of materiality and timeliness as information disclosed under Rule 15c2-12.”]}

Section VI. Compliance Policies

Issuance and Post-Issuance Compliance Policies Generally

The Issuer, in consultation with its bond counsel and municipal advisor, as appropriate, shall adopt comprehensive issuance and post-issuance compliance policies or procedures for its debt issuances (“Compliance Policy”). The basic purpose of a Compliance Policy for debt issuances for which a federal tax exemption is provided by the Code is to ensure that the Issuer will be in compliance with requirements of the Code that must be satisfied with respect to the debt issuance after the debt is issued in order to maintain the tax exemption for the debt issuance. The Compliance Policy shall provide for procedures to be followed by designated officials of the Issuer in order to periodically check on whether requirements of the federal arbitrage regulations and the restrictions of the federal private activity bond regulations applicable to the investment and use of proceeds of tax-exempt bond issuances, as well as the facilities financed with those proceeds, are being properly observed. The Compliance Policy also may include procedures designed to assist the Issuer in the preparation, vetting and approval of bond disclosure documents, and the preparation, vetting, approval and timely filing of continuing disclosure documents. Some areas of issuance and post-issuance compliance activities are discussed below.

[Alternative text ”Tax Compliance - The Issuer shall comply with all applicable Federal, State, and contractual requirements regarding the tax status of bonds, notes and other debt. The Issuer [shall adopt][has adopted] post-issuance tax compliance procedures [including checklists] to monitor compliance with the requirements applicable to tax-exempt and tax advantaged debt. At a minimum, the written tax compliance procedures should contain the following:

✓ Identification of the individuals who are responsible for monitoring tax compliance including post issuance tax compliance;

✓ A description of the training provided to the responsible individuals about monitoring compliance;

✓ The frequency of compliance checks (at least annually);

✓ The nature of the compliance activities required;

✓ The procedures used to timely identify and elevate the resolution of a violation when it occurs or is expected to occur;

✓ Procedures for the retention of all records material to substantiate compliance with the federal tax law requirements; and

✓ The acknowledgement of the availability of the IRS VCAP program and other self-help remedial actions.”]

[Alternative text ”Disclosure Compliance - The Issuer shall comply with federal securities laws in connection with disclosures to investors. The Issuer [shall adopt][has adopted] issuance and post-issuance disclosure compliance procedures [including checklists] to ensure the accuracy and completeness of all disclosure documents. At a minimum, the compliance procedures should:

• clearly identify individuals responsible for preparing, reviewing and approving initial and continuing disclosure documents;

• clearly outline the process by which initial and continuing disclosure documents are drafted, reviewed and approved (and timely filed, in the case of continuing disclosure filings)

• provide checks and balances to ensure adequate supervision and reasonable disbursement of responsibilities; and

• provide for periodic training of responsible individuals”]

[Alternative text ”EMMA - The Issuer has committed to provide or cause to be provided, either directly or through a designated agent, annual disclosure reports and notices regarding the occurrence of certain events specified by the SEC. These reports and notices will be submitted to the Municipal Securities Rulemaking Board (MSRB) through its Electronic Municipal Market Access (EMMA) website.”]

[Investment of Proceeds

General - The Issuer shall comply with all applicable Federal, State, and contractual restrictions regarding the investment of bond proceeds, including Issuer’s Investment Policy. This includes compliance with restrictions on the types of investment securities allowed, restrictions on the allowable yield of some invested funds as well as restrictions on the time period over which some bond proceeds may be invested.

{Arbitrage Compliance. The Issuer will comply with arbitrage requirements on invested tax-exempt bond proceeds. The Issuer shall consult with bond counsel, and, if necessary, a arbitrage rebate consultant regarding which actions are necessary to comply with the arbitrage restrictions and arbitrage rebate requirements of the Code.}

Refunding Escrow - Unless otherwise justified and deemed necessary Issuer shall utilize United States Treasury Securities State and Local Government Series (SLGS) for investments held in a the refunding escrow.]

{If open market securities (“OMS”) are deemed appropriate for a refunding escrow, such as in the case where SLGS are not available for purchase from the United States Bureau of Public Debt {or OMS result in materially more savings}, the Issuer shall in consultation with Bond Counsel comply with each of the following:

a) Engage a bidding agent to solicit bids to provide the OMS in compliance with all of the applicable “safe harbor” requirements of the federal arbitrage regulations for determining that the securities will be treated as having been purchased at their fair market value; and

b) Restrict the types of OMS for which the solicitation is made to those securities that are eligible to be used under state law and the defeasance provisions that apply to the refunded debt under its authorizing ordinance or resolution.

The cost of bidding agent services, which is to be approved by the Issuer, shall be included in the OMS price and paid contingent upon bond closing.}.}

Bond Users Clearinghouse

The Issuer shall ensure that the Bond Users Clearinghouse receives municipal bond information for all debt sold as provided by RCW 39.44.200 through 39.44.240 and Chapter 365-130 WAC. The information requested by RCW 39.44.210 includes but is not limited to:

✓ the par value of the bond issue;

✓ the effective interest rates;

✓ a schedule of maturities;

✓ the purposes of the bond issue;

✓ cost of issuance information; and

✓ the type of bonds that are issued.

Legal Covenants

The Issuer shall comply with all covenants and conditions contained in governing law and any legal documents entered into at the time of a bond offering.

Section VII. Other Policies

Rating Agencies

The Responsible Unit [, in consultation with its municipal advisor,] shall manage relationships with the rating analysts assigned to the Issuer’s credit, using both informal and formal methods to disseminate information. {Communication with the rating agencies shall include {include only applicable items}:

✓ [A formal presentation, on a regular basis, to the rating agencies, covering economic, financial, operational and other issues that impact the Issuer’s credit;]

✓ [Timely disclosure of any financial events that may impact the Issuer’s credit;

✓ Timely responds to requests for information;

✓ Timely dissemination of the Annual Financial Report, following its adoption;

✓ [Full disclosure, on an annual basis, of the financial condition of the Issuer;] and

✓ Complete and timely distribution of any documents pertaining to the sale of bonds.]

Credit Objective - The Issuer shall seek to maintain and improve its current rating of ___ from ___ rating agency. [Alternative text: The Issuer shall seek a minimum rating of ___ from ___ rating agency} {The Issuer shall obtain [a minimum number of] ___ ratings for its ____ issues…}.

Refunding Savings Thresholds

Refundings will be conducted in accordance with the Refunding Bond Act, chapter 39.53 RCW. Issuer will consider refinancing debt to achieve [debt service] savings as market opportunities arise.

Unless otherwise justified, an “advance refunding” [“transaction” or “of a maturity”] will require a present value savings of [five] percent of the principal amount of the refunded debt [refunding debt being issued].

Unless otherwise justified, a “current refunding” [“transaction” or “of a maturity”] will require graduated present value savings as follows:

|Years Between Call and Final Maturity | |

| |Present Value Standard |

|[>= 1 and = 3 and = 5 and = 7 and ................
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