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ISSUANCE / FINANCING POLICY

 


The CSCDA Financing Policy is intended as a guide for the Authority and for applicants. While the Authority reserves the right, in its discretion, to approve exceptions, applicants should not expect any exceptions.

I. General Requirements – All Financings

The following issuance policies relate to all financings issued through CSCDA:

  1. The city, county or local agency hosting the proposed project must be a member of CSCDA. Click here for a list of CSCDA member public agencies.
  2. Approval by the city, county or local agency hosting the proposed project as required under the Internal Revenue Code (if applicable) and as set forth in Section 9 of the CSCDA Joint Powers Agreement.
  3. Standard indemnification with respect to the financing and the project provided by the applicant to CSCDA in the appropriate financing documents.
  4. Standard indemnification with respect to the issuance and sale of Bonds provided by the underwriter to CSCDA in the purchase contract.
  5. CSCDA's Counsel shall conduct a review of the financing documents for consistency with CSCDA policies and form documents.
  6. CSCDA's Executve Director and Program Manager shall conduct a review of the financing and the associated public benefits.
  7. If offering material or a disclosure document is required, it shall contain language that CSCDA takes no responsibility for the disclosures contained therein (except for information under the sections titled "THE AUTHORITY" and "LITIGATION" to the extent such information pertains to CSCDA);
  8. If offering material or a disclosure document is required, the applicant shall have its counsel deliver a 10b-5 opinion covering such document at closing. The contents of such opinion shall be to the satisfaction of CSCDA and its Counsel.
  9. No gaming facilities are to be financed.

II. Requirements for Financings Rated "BBB- or Baa3" or Better

 

Financings that have been assigned a minimum of one investment grade credit rating1 by Standard & Poors, Moody's Investors Service or Fitch Ratings will be subject to the  issuance requirements below:

  1. Bonds may be issued and sold through a public offering, private placement or limited public offering with appropriate disclosure or offering materials.
  2. Bonds may be issued in $5,000 or such other minimum denominations at the discretion of the applicant and approved by CSCDA.
  3. Bonds not sold to an “underwriter” within the meaning of the Securities Act of 1933 (for example, by private placement) shall be sold to purchasers who have executed a sophisticated investor letter in form acceptable to CSCDA.

1 The lowest investment grade credit rating by S&P and Fitch is BBB- and by Moody’s is Baa3.

III. Requirements for Financings Rated Below "BBB-",  or Non-rated2

  1. Bonds must be sold to purchasers that are "qualified institutional buyers" as generally defined under Rule 144A of the Securities Act of 1933 and/or “accredited investors” as generally defined under Regulation D of the Securities Act of 1933, in each case who have executed a sophisticated investor letter in form acceptable to CSCDA.
  2. The offering material/disclosure document, if any, shall prominently indicate on the cover that Bonds can only be sold to qualified institutional buyers or accredited investors, as applicable.
  3. The face of each Bond shall contain a legend stating to the effect that such Bond can only be sold to qualified institutional buyers or accredited investors, as applicable.
  4. The bond documents shall contain provisions that restrict the ability to transfer the Bonds to only qualified institutional buyers or accredited investors, as applicable.
  5. Bonds may be issued and sold through a private placement or limited public offering with appropriate disclosure or offering materials.
  6. Bonds sold to "qualified institutional buyers" or "accredited investors" as specified above shall be sold in minimum denominations of $25,000 or greater.

2Except non-rated land secured financings that meet the authority’s minimum credit criteria detailed in Section IV.

IV. Requirements for Land Secured Bond Financings

The value of real property subject to either a special tax or special assessment to pay debt service must be at least four times the principal amount of the bonds being sold through CSCDA plus all other bonds outstanding that are secured by a special tax or assessment.  All special tax or assessment bond financings must be enhanced by a reserve fund in the amount equal to the lesser of (a) 10% of the original proceeds of the bonds, (b) maximum annual debt service on the bonds, and (c) 125% of the average annual debt service on the bonds.  The Authority may require additional measures to increase the credit quality of land secured bond issues.  Land secured financings will be subject to the issuance requirements below:

  1. Bonds may be issued and sold through a public offering, private placement or limited public offering with appropriate disclosure or offering materials.
  2. Bonds may be issued in $5,000 or such other minimum denominations at the discretion of the applicant and approved by CSCDA.

Click here for a copy of CSCDA’s goals and policies for Mello-Roos Community Facilities Districts.

V. Criteria for Ownership (P3) Structure

  1. Sponsor would agree to include structural and document protections of CSCDA, set out in an outline prepared by Orrick Herrington & Sutcliffe based on its prior experience designing and implementing this structure.  These protections will include (a) Disclaimers of contractual liability of any kind with respect to the bonds and all the other agreements to which CSCDA is a party, (b) Disclaimer of responsibility for information contained in any disclosure document (other than the “Authority” and “Litigation” sections), (c) Adequate indemnifications or Indenture provisions for the funding of accounts with enough revenues from the project to cover any expenses the CSCDA may incur for any reason (budgeted and unbudgeted), and (d) Delegation as much as possible to the Bond Trustee, the Manager or the Financial Consultant of any additional responsibilities CSCDA might otherwise have as a result of its ownership of the project.
  2. Orrick would be Issuer and Bond Counsel, and in such capacity would report to the Board any material adverse deviations prior to authorization of bonds and documents by the Board.
  3. In the event a disclosure document is prepared, any opinion rendered by disclosure or underwriters counsel would also be addressed to CSCDA.
  4. In event of private placement or limited offering, an investor letter would be required in connection with the original sale in form satisfying #1 and 2 above.
  5. CSCDA would select an Insurance Consultant, and the insurance required with respect to the project would meet or exceed the recommendations of the insurance consultant.
  6. CSCDA would not select, but would review the qualifications and concur in the selection of, the Facilities Manager.
  7. CSCDA would engage a Financial Consultant to act as CSCDA’s fiduciary financial consultant on the transaction, and post closing to oversee performance of the Facilities Manager, including formulation of budgets and approving disbursements, performing other tasks of the CSCDA as owner that are specified in accordance with #1d above, review post-issuance rebate and other tax and disclosure compliance, and report annually to the Board on the foregoing.
  8. CSCDA will, at its discretion, annually review the Insurance Consultant, Facilities Manager and Financial Consultant, and make any changes it deems appropriate, including replacement of any such party if it is in default or otherwise not performing satisfactorily, provided that CSCDA will not seek to change the Facilities Manager without concurrence of the Bond Trustee and any ground lessor, donee of the project or other holder of residential interests in the project, and subject to any conditions set out in the bond documents.
  9. The foregoing are in addition to the usual provisions and procedures the CSCDA applies to approving traditional conduit financings.          

Effective Date

CSCDA's Financing Policy as set forth herein shall be effective immediately upon its adoption. (January 22, 2002; as revised on September 16, 2003, and as further revised on August 17, 2006, January 27, 2010, November 23, 2010, March 6th 2014 and April 23, 2015).

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