All attorneys representing municipal and other public sector clients should be aware of the potential for a United States Securities and Exchange Commission (SEC) investigation of their clients’ public bond deals. Issuers generally will hire a team of professionals with specialized experience in public finance to assist them in completing a financing; such professionals commonly include bond counsel, disclosure counsel, and a municipal advisor. But even the general practice solicitor that handles all day-to-day legal issues for the client will play an important role in the financing process. Continue Reading Solicitors: Help Avoid Targeting by the SEC in Municipal Bond Offerings
Since September 2021, the United States Securities and Exchange Commission (the SEC) has brought five enforcement actions regarding municipal bond financings. The issuers of these bonds are Sweetwater Union High School District (Texas); Crosby Independent School District (California); Town of Sterlington (Louisiana); City of Rochester (and its school district) (New York); and Johnson City (Texas). In each case, the issuers and other involved parties were charged with providing false and misleading information to municipal bond investors. Enforcement was not limited to entities; individuals representing the issuers were also targeted. Additional information about these cases (and earlier cases) is available on the SEC website, at https://www.sec.gov/municipal/oms-enforcement-actions.html.
Here are seven lessons to be learned from these cases: Continue Reading Seven Lessons to be Learned from Recent SEC Enforcement Actions Involving Municipal Bond Financings
The Securities and Exchange Commission (SEC) recently charged two chief financial officers of school districts with misleading investors in municipal bond offerings. This should be a warning to municipal CFOs to be very careful to make appropriate disclosures when involved in their public entities’ bond issues. An SEC official recently stated that “the SEC is committed to holding bad actors in municipal securities offerings accountable for their misconduct.” Don’t be the CFO bad actor that the SEC targets! Continue Reading Municipal CFOs: Be Careful of your Bond Disclosures; the SEC is Gunning for You
The American Rescue Plan Act (“ARPA”) was enacted in March 2021 providing an unprecedented $1.9 trillion in direct relief to combat the effects Covid-19, whether it be negative economic impacts, public health implications, revenue loss, or identified needs in infrastructure. Pennsylvania and its municipalities received approximately $14 billon in those federal ARPA funds!
ARPA funds come with certain new reporting requirements. For municipalities, the first round of that new reporting (the “Project and Expenditure Report”) is due to the U.S. Treasury by April 30, 2022. Every municipality that received ARPA funds must file this report (even if you haven’t spent anything yet).
Furthermore, and this is especially important, Continue Reading ARPA Reporting due April 30, 2022!
In December 2017, former President Donald Trump signed into law the Tax Cuts and Jobs Act. Among the many provisions of the Act was a provision that eliminated the tax exemption for municipal bonds that advance refunded another series of bonds. Prior to its passage, issuers had the ability to issue such bonds on a tax-exempt basis, and did so for a variety of reasons, including to achieve debt service savings. With the loss of tax-exempt status for advance refunding bonds issued after the passage of the Act, issuers and their advisors have searched for alternatives to the traditional tax-exempt advance refunding model.
In this article, we explore some of the alternatives that issuers have applied to achieve the same or similar benefits that would be achieved with a traditional tax-exempt advance refunding. First, we discuss the use of “forward delivery” bonds, where the bonds are sold, but not delivered to investors until a much later date in the future; second, we consider so-called “Cinderella” bonds, which are issued taxable but later convert to tax-exempt; and finally, “tenders and exchanges,” where issuers, often in conjunction with a current issuance, make an offer to investors to acquire their outstanding bonds, either for purchase or exchange. Continue Reading Four Years On, Alternatives to Tax-Exempt Advance Refundings Continue to Proliferate in Municipal Bond Market
In its recent decision, Appeal of Best Homes DDJ, LLC, 239-40 C.D. 2020 (Dec. 23, 2021), the Pennsylvania Commonwealth Court considered, among other issues, whether MS4 fees imposed by the City of Chester Stormwater Authority constituted an impermissible tax. The case involved a challenge by certain rate/fee-payers that the Authority’s “fees” were actually “taxes” because, according to the Appellants, the fees were revenue-generating and used for projects unrelated to stormwater management.
Holding in favor of the Authority, the Court concluded that the evidence presented by the Appellants was insufficient to meet their burden of proving that the fees were invalid. The Court’s decision is important because it outlines the significant fact evidence required to overturn a stormwater user fee. A full explanation of the Court’s decision, including other legal challenges brought against the Authority, can be found here on our State and Local Tax Blog.
Timothy Horstmann, member of McNees Wallace & Nurick’s Public Finance and Government Services Group, will be discussing the importance of the archival and long-time preservation of electronic documents for Pennsylvania municipalities and townships in an upcoming webinar.
The panel of thought leaders will share tips for how to become PDF/A compliant at little to no cost, important because a Pennsylvania State Archives and Local Government Records Committee policy allows municipalities to maintain electronic records so long as specific requirements are met. Continue Reading McNees Attorney Providing Key Tips, Resources for Townships’ Preservation of E-Documents
McNees Public Finance attorneys Timothy J. Horstmann and Ryan T. Gonder will present “Preparing for an Audit of ARPA Expenditures: What to Do Now,” at the Pennsylvania State Association of Township Supervisors annual conference in Hershey, Pennsylvania, this April. Continue Reading McNees Public Finance Attorneys to Present on ARPA Expenditures
As colleges and universities develop and implement sustainability plans to reduce their carbon footprint, there remains the question as to how to fund these sustainability plans. Some colleges and universities look to federal and state grants for a portion of this funding and some look to donors. In addition to these options, there is a new development in the debt market which could also lead to lower interest rates for issuers as a result of increased demand: ESG bonds and Green bonds. Continue Reading Why ESG Bonds and Green Bonds May Help Colleges and Universities with Their Sustainability Plans
The United States Department of the Treasury recently published its Final Rule implementing the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) program established by the American Rescue Plan Act of 2021 (ARPA). The Final Rule adopts with amendments the Interim Final Rule published by Treasury on May 17, 2021. The Final Rule updates the rules governing the expenditure of funds received by public entities under the program. Continue Reading Treasury Issues Final Rule on Expenditure of State and Local Coronavirus Recovery Funds