COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: City Disclosure Policy POLICY
NUMBER EFFECTIVE
DATE
PAGE
220-07 June 21,
201611/12/202
4 1 of 114
ADOPTED BY: Resolution No. 2016-127 DATED: 6/21/2016 AMENDED BY: Resolution No. 2024-___ (11/12/2024)
BACKGROUND
The City Council adopted the City’s Debt Policy No. 220-05 on January 14, 2014. ; it was amended on November 12, 2024. The City’s Debt Policy includedincludes a brief summary of the City’s disclosure requirements. The main objectives of this policy are to expand on the City’s legal requirements related to debt disclosure; to define the appropriate roles and responsibilities necessary for continued compliance; and to certify compliance by all officers involved related to future offering documents.
PURPOSE
ToThe purpose of this Policy is to set forth policies and principles of the City’s disclosure obligations related to securities , including notes, bonds and certificates of participation, issued by the City and , associated financing authorities, assessment districts , and community facilities districts (“CFDs”) to ensure that the City and such related entities . continue to comply with all applicable disclosure obligations and requirements under the federal securities laws.
POLICY
GENERAL POLICIES
Legal Requirements
The From time to time, the City issues securities, associated financing authorities, assessment districts and CFDs issue certificates of participation, lease revenue bonds, pension obligation bonds, revenue bonds, notes or other obligations, (collectively, “Obligations”) in the public order to fund or ref und capital market.investments, other long-term programs and working capital needs, as applicable. When bondsObligations are issued, to the public and at other times when the City has an obligation to disclose all material information and to meet makes certain standards in compliance reports, the City must comply with the “anti-fraud rules” of federal securities laws. These include but are not limited(“Anti- fraud rules” refers to Section 17 of the Securities Act of 1933 – Anti-Fraud,and Section 10(b) of the Securities and Exchange Act of 1934, and regulations adopted by the Securities and Exchange Commission (SEC) Rule 10b5, and SEC Rule 15c -2-12.under those Acts, particularly “Rule 10b -5” under the 1934 Act).
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 wh ich would be necessary to provide to investors a complete and transparent description of the Obligations and the
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: City Disclosure Policy POLICY
NUMBER EFFECTIVE
DATE
PAGE
220-07 June 21,
201611/12/202
4 2 of 114
ADOPTED BY: Resolution No. 2016-127 DATED: 6/21/2016 AMENDED BY: Resolution No. 2024-___ (11/12/2024)
City’s financial condition (or, in the case of CFD Obligations, the development within the CFD and other factors which may affect the willingne ss or ability of the property owner therein to pay special taxes when due). In the context of the sale of securities, a fact is considered to be “material” if there is a substantial likelihood that a reasonable investor would consider it to be important i n determining whether or not to purchase the securities being offered.
The consequence of incomplete, inaccurate or misleading disclosure could have significant financial impacts on the City and on individual elected officials, officers, and staff. These a ctions include, but are not limited to:
Securities and Exchange Commission (SEC) SEC Investigation – SEC has the power to bring civil actions or refer to Justice Department for criminal action. Levels of culpability include: negligence, recklessness, and intent to defraud (“scienter”). . Requirement to impose cumbersome procedures and oversight to settle SEC actions. Adverse publicity to the City – Which could result in reduced market access. Rating Downgrades, which could potentially trigger costly mitigation on bond issues.
The benefits of sound Sound disclosure practices can havecreate both tangible and intangible affectsbenefits:
Enhancement of credibility in the marketplace.
Foster liquidity for the securities.
Demonstrate a solid disclosure track record that will be viewed favorably by investors, credit rating agencies, and the public.
Scope of Application
This policy is consistent in its application with the City’s Debt Policy. Additionally, the policies herein apply to all documents and information that are reasonably expected to reach investors/securities market, including:
Initial disclosure,
Continuing disclosure, (annual and material events), and Other information (audits, budgets, certain press releases, web site posting, financial presentations, etc.)
Initial Disclosure
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: City Disclosure Policy POLICY
NUMBER EFFECTIVE
DATE
PAGE
220-07 June 21,
201611/12/202
4 3 of 114
ADOPTED BY: Resolution No. 2016-127 DATED: 6/21/2016 AMENDED BY: Resolution No. 2024-___ (11/12/2024)
When the City issues Obligations, the two central disclosure documents which are prepared are a preliminary official statement ( “POS”) and a final official statement ( “OS”, and collectively with the POS, the “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 or appendix, which p rovides information on the City’s financial condition as well as certain economic demographic information concerning the City (which may be property tax assessments or may be other City revenues depending on the type of Obligations being issued); and (iii) various other appendices, including the City’s audited financial report, form of the proposed legal opinion, and form of continuing disclosure undertaking. With respect to CFDs, the Official Statement contains limited information about the City, as CFD Obligations are special obligations of the CFD and are not secured by any funds of the City, and instead contains a description of the Obligations and the special taxes securing the Obligations, a description of the CFD, the improvements and taxpayers therein, a property ownership and development section if the CFD is not fully built out, a risk factors section containing risks specific to the CFD and CFDs in general, in addition to other sections. Investors use the Official Statement as one of their primar y resources for making informed investment decisions regarding the City’s Obligations.
For Obligations which are repaid from the City’s General Fund, the information regarding the financial condition of the City, relevant City operations and other material economic information is typically included in Appendix A to the Official Statement.
Continuing Disclosure
In connection with the issuance of Obligations, the City enters into contractual agreements (“Continuing Disclosure Certificates”) 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 Certificates.
The City must comply with the specific requirements of each Continuing Disclosure Certificate. The City’s Continuing Disclosure Certificates require that the annual reports be filed between 210 and 270 days (depending on the issuance) after the end of the City’s fiscal year, and event notices are required to be filed within 10 days of their occurrence (full listing at end of policy).
The City is required to report certain agreements which constitute debt to the California Debt and Investment Advisory Committee pursuant to the applicable State statutes and regulations (the “CDIAC Rules”). Whether a particular agreement constitutes debt under the CDIAC Rules may be taken into consideration when analyzing the appropriateness of reporting the agreement as a financial obligation.
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: City Disclosure Policy POLICY
NUMBER EFFECTIVE
DATE
PAGE
220-07 June 21,
201611/12/202
4 4 of 114
ADOPTED BY: Resolution No. 2016-127 DATED: 6/21/2016 AMENDED BY: Resolution No. 2024-___ (11/12/2024)
However, whether an agreement constitutes “debt” for purposes of CDIAC Rules is not dispositive of whether the agreement constitutes a financial obligation.
The Director of Finance/Treasurer shall be responsible for preparing and filing , or causing to be prepared and filed, the annual reports and material event notices required pursuant to the Continuing Disclosure Certificates. 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).
With respect to CFD Obligations, the Continuing Disclosure Certificates generally require the filing of the City’s audited financial statements and certain information concerning the CFD itself. The City’s special tax consultant typically assists the City in preparing the annual reports for the City’s CFDs.
The City has adopted policies and procedures to monitor its compliance with its undertakings under the SEC Rule 15c2-12 and has retained an outside consultant to assist in the filing process. The Finance Department has assigned specific personnel to coo rdinate with the outside consultant and to monitor compliance.
Governing Authority and Responsibility
A. Authority – The City’s disclosure program shall be managed in conformance with applicable federal, state, and other legal requirements, including Chula Vista City Codes.
1. As provided for in the Debt Management Practices Section of the City’s Debt Policy, this Disclosure Policy augments the City’s Debt Policy, as such all provisions of the Debt Policy apply only as to specifics related to disclosure compliance. . In the event of any conflicts between the Debt Policy and the Disclosure Policy, the Debt Policy shall prevail.
B. Point of Contact -– The CityDirector of Finance Director/Treasurer shall be designated as the primary party responsible for the development, distribution, and determination of the materiality of information.
C. Responsibility
1. As the primary Point of Contact, it shall be the responsibility of the Office of the Finance Director/TreasurerDepartment to oversee all aspects of disclosure. As such, the Office
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: City Disclosure Policy POLICY
NUMBER EFFECTIVE
DATE
PAGE
220-07 June 21,
201611/12/202
4 5 of 114
ADOPTED BY: Resolution No. 2016-127 DATED: 6/21/2016 AMENDED BY: Resolution No. 2024-___ (11/12/2024)
of the Finance Director/TreasurerDepartment is responsible for reviewing the form and content of the City’s documents and materials prepared, issued, or distributed in connection with the City’s disclosure obligations relating to its securities; to include but not limited to: preliminary and final o fficial statements, annual continuing disclosure reports POS and OS, Continuing Disclosure Certificates , material event notices and other voluntary filings to the Municipal Securities Rulemaking Board disclosure portal Electronic Municipal Market Access (EM MA), press releases, rating agency presentations, web ‐ site postings, investor presentations, and other communications reasonably expected to reach investors or the securities markets.
2. Along with the Finance Director of Finance /Treasurer, the City Attorney, and City Manager shall serve as integral members of the financing team, each, as appropriate, responsible for ensuring and certifying to the accuracy of the information released to the market.
3. The City is responsible for the content of its disclosure documents. The City Finance Director of Finance/Treasurer, City Attorney, and City Manager shall ensure that the use of outside professionals for their respective areas of expertise is appropriate and reliance upon such expertise is reasonable and not excessive.
4. The Office of the City Finance Director/TreasurerDepartment shall ensure that subject matter experts are involved in the development of disclosure documents.
1. The Office of the City Finance Director/Treasurer shall be responsible for arranging training for City staff, officials, City Council members, and the Mayor regarding their obligations relating to disclosure matters under federal securities laws.
5. a. Periodic training for the staff involved in the preparation of t he OS (including Appendix A) is coordinated by the Director of Finance/Treasurer and City Attorney’s Offices, with the assistance of Disclosure Counsel. These training sessions are provided to assist staff members and officials involved in identifying relevant disclosure information to be included in Appendix A. The training sessions also provide an overview of federal laws relating to disclosure, situations in which disclosure rules
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: City Disclosure Policy POLICY
NUMBER EFFECTIVE
DATE
PAGE
220-07 June 21,
201611/12/202
4 6 of 114
ADOPTED BY: Resolution No. 2016-127 DATED: 6/21/2016 AMENDED BY: Resolution No. 2024-___ (11/12/2024)
apply, the purpose of the Official Statement and Appendix A, 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 Disclosure Counsel concernin g disclosure obligations and are encouraged to contact Disclosure Counsel at any time if they have questions.
a. The City Manager and City Attorney shall ensure the attendance at such training of those persons for whom the CityDirector of Finance Director/Treasurer recommends such training.
5.6.City officers and staff serving as financing team members have the responsibility to review and provide input on draft documents. Such review shall take into consideration that all material information is included, accurate, and relevant. Politically sensitive and confidential considerations are not exceptions to disclosure.
6.7.Officers and employees of the City and related entities shall promptly provide such information, assurance, and/or certifications as the CityDirector of Finance Director/Treasurer, in his or her sole discretion, may request in order to assure compliance with federal securities laws.
a. a. The City Manager and City Attorney shall participate in andtake such actions as may be in compliance with necessary so that requests of those persons for whom the City Finance Director of Finance/Treasurer deems necessary to ensure good disclosure practicesaccurate disclosures are made.
7.8.The Office of the City Finance Director/TreasurerDepartment shall ensure that drafts of the offering documents are provided to the City Manager, City Attorney, City staff, and the Mayor / City Council, as appropriate, to allow timely decisions regarding disclosure.
8.9.The Office of the City Finance Director/TreasurerDepartment shall arrange for the CityDirector of Finance Director/Treasurer, a representative from the Office of the City Attorney and a representative from the City Manager's Office and representatives from other departments as deemed appropriate to participate in a due diligence meeting or call with the underwriters of the bonds (in the case of negotiated sale) and/or with Disclosure
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: City Disclosure Policy POLICY
NUMBER EFFECTIVE
DATE
PAGE
220-07 June 21,
201611/12/202
4 7 of 114
ADOPTED BY: Resolution No. 2016-127 DATED: 6/21/2016 AMENDED BY: Resolution No. 2024-___ (11/12/2024)
Counsel (in the case of a competitive sale) prior to the release of the offering documents for the bonds.
Certifications
In connection with the approval of offering documents for securities by the City Council, the CityDirector of Finance Director/Treasurer, City Manager, and City Attorney each shall certify in writing to the City Council that to the best of his or her knowledge, such documents do not make any untrue statements of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading. In the event the City Manager or City Attorney, or City Director of Finance Director/Treasurer is unavailable, an authorized designee may make the certification required by this section.
PROCEDURES
Engagement of Outside Disclosure Counsel
The City engages outside legal counsel with expertise in securities laws for advice with respect to the City’s disclosure obligations and requirements under the federal securities laws (“Disclosure Counsel”).
Disclosure Counsel assists the City in preparing the Official Statement (including the sections or appendices which contain information on the City’s financial condition or the CFD, as applicable), and reviews all new data and updates to the Official S tatement. Throughout the process of receiving and incorporating material, Disclosure Counsel provides advice as to standards of materiality and other securities law issues. Disclosure Counsel has a confidential, attorney-client relationship with officials and staff of the City.
Disclosure Counsel provides a negative assurance letter as to the disclosure set forth in the Official Statement for each Obligation. The letter advises the City and the Obligations underwriters that as a matter of fact and not opinion that no information came to the attention of the attorneys working on the transaction which caused them to believe that Official Statement as of its date and as of the date of their letter (except for any financial, statistical, economic or demogra phic data or forecasts, charts, tables, graphs, estimates, projections, assumptions or expressions of opinion, and other customary exclusions), contained or contains any untrue statement of a material fact or omitted or omits to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
Disclosure Process
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: City Disclosure Policy POLICY
NUMBER EFFECTIVE
DATE
PAGE
220-07 June 21,
201611/12/202
4 8 of 114
ADOPTED BY: Resolution No. 2016-127 DATED: 6/21/2016 AMENDED BY: Resolution No. 2024-___ (11/12/2024)
When the City determines to issue Obligations, the Finance Department staff requests the involved departments to commence preparation of the portions of the Official Statement (including particularly the appendix or section(s) containing information on the City’s financial condition and operations) for which they are responsible.
For Obligations which are paid from the General Fund or other special enterprise fund, the general format and content of the Official Statement does not normally change substantially from offering to offering, except as necessary to reflect major events.
Notwithstanding the foregoing, the City Manag er, Finance Department and City Attorney staff are separately responsible for reviewing and preparing or updating certain portions of the Official Statement which are within their particular area of knowledge.
Additionally, all participants in the disclosure process are separately responsible for reviewing the entire Official Statement.
Members of the financing team, including the City’s bond counsel ( “Bond Counsel ”), Disclosure Counsel and the City’s municipal advisor ( “Municipal Advisor”) assist City staff in determining the materiality of any particular item, and in the development of specific language in the Official Statement.
For Obligations which are paid from the General Fund, 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 forepart of the Official Statement. This overview highlights particular areas of concern.
The Director of Finance/Treasurer schedules one or more meetings or conference calls of the financing team working group (which includes City officials, the Municipal Advisor, Disclosure Counsel, Bond Counsel, the underwriter of the Obligations, and their counsel (in the event of a negotiated sale)), and new drafts of the Official Statement are circulated and discussed. During this part of the process, there is substantial contact among City staff and 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.
CFD Obligations
When a CFD is ready to issue bonds, the City’s Development Services Department (in the case of new financings) and the City’s Finance Department (in the case of refundings) organize the financing team to commence preparation of the POS.
Typically, the initial draft of a CFD Official Statement is assembled with input from Bond Counsel, Disclosure Counsel, the Municipal Advisor, City’s special tax consultant, appraiser, the developer(s)
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: City Disclosure Policy POLICY
NUMBER EFFECTIVE
DATE
PAGE
220-07 June 21,
201611/12/202
4 9 of 114
ADOPTED BY: Resolution No. 2016-127 DATED: 6/21/2016 AMENDED BY: Resolution No. 2024-___ (11/12/2024)
of the property in the CFD (the “Developer” and their counsel (if one or more Developer’s own property in the CFD) and the underwriter and their counsel (in the event of a negotiated sale).
The staff in the Development Services Department, with the assistance from the Finance Department, review the draft POS once distributed by Disclosure Counsel, specifically the information included with respect to the CFD and the formation thereof by the City.
Once the POS has been distributed, one or more due diligence conference calls or meetings with the entire CFD financing team are held until the POS is finalized.
Typically, prior to printing the POS, each Developer will be required to sign a “10b ‐ 5” certificate stating that the information in the POS provided by or pertaining to the Developers and their development within the CFD does not contain any untrue statement of material fact or omit to state any material fact necessary to make the statements contained in the POS in light of the circumstances under which they were made, not misleading.
Appendix A to the POS and OS
The information contained in Appendix A is primarily developed by personnel in the City Manager’s Office, Finance Department and City Attorney’s Office. In certain circumstances, including when City Obligations are secured by particular revenues (such as revenues from development impact fees), additional officials will be involved, as necessary. In addition, the Municipal Advisor participates throughout the process of preparing the Official Statement and developing the structure of the financing.
The following principles govern the work of the respective staff that contribute information to Appendix A:
City staff involved in the disclosure process are responsible for being familiar with federal securities laws as they relate to disclosure.
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 with Disclosure Counsel if there are questions regarding materiality of an issue. 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 intended to be a rigid list of procedural requirements, but instead to provide guidelines for disclo sure review. If warranted, based on experience during financings or because of additional SEC pronouncements or other appropriate reasons, the City should consider revisions to the Procedures.
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: City Disclosure Policy POLICY
NUMBER EFFECTIVE
DATE
PAGE
220-07 June 21,
201611/12/202
4 10 of 114
ADOPTED BY: Resolution No. 2016-127 DATED: 6/21/2016 AMENDED BY: Resolution No. 2024-___ (11/12/2024)
The process of updating Appendix A from transaction to transact ion 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 Appendix A 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 ensure that the particular officials involved in the disclosure process are of sufficient seniority such that it is reasonable to believe that, collectively, they are in possession of material information relating to the City and its finances.
Material Events Listing
Specific events which require material event notices generally consist of the following:
A. Any of the following events with respect to the Obligations (in a timely manner, not more than ten (10) business days after the event):
1. Principal and interest payment delinquencies;
2. Unscheduled draws on debt service reserves reflecting financial difficulties;
3. Unscheduled draws on credit enhancements reflecting financial difficulties;
4. Substitution of credit or liquidity providers, or their failure to perform;
5. Issuance by the Internal Revenue Service of proposed or final determination of taxability or of a Notice of Proposed Issue (IRS Form 5701 TEB);
6. Tender offers;
7. Defeasances;
8. Rating changes;
9. Bankruptcy, insolvency, receivership or similar event of the obligated person; or
10. Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a financial obligation of the obligated person, any of which reflect financial difficulties.
B. Any of the following events with respect to the particular Obligations, if material:
1. Unless described in paragraph ( A)(5) above, adverse tax opinions or other material notices or determinations by the Internal Revenue Service with respect to the tax status of the particular Obligations or other material events affecting the tax status of the Obligations;
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: City Disclosure Policy POLICY
NUMBER EFFECTIVE
DATE
PAGE
220-07 June 21,
201611/12/202
4 11 of 114
ADOPTED BY: Resolution No. 2016-127 DATED: 6/21/2016 AMENDED BY: Resolution No. 2024-___ (11/12/2024)
2. Modifications to rights of holders of the particular Obligations;
3. Optional, unscheduled or contingent calls of the particular Obligations;
4. Release, substitution, or sale of property securing repayment of the particular Obligations;
5. Non-payment related defaults;
6. The consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms;
7. Appointment of a successor or additional trustee or the change of name of a trustee; or
8. Incurrence of a financial obligation of the obligated person, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of the obligated person, any of which affect security holders.
In the events listed above, the applicable SEC rule defines a “financial obligation” as a (i) debt obligation; (ii) derivative instrument entered into in connection with or pledged as security or a source of payment for, an existing or planned debt obligation; or (iii) a guarantee of (i) or (ii). The term “financial obligation” does not include municipal securities as to which a final official statement has been provided to the Municipal Securities Rulemaking Board. The SEC has provided limited guidance on the specific application of the definition of “financial obligation.” The SEC release accompanying the final amendment does suggest a key concept is that a “financial obligation” involves the borrowing of money.
The Finance Department will monitor agreements or other obligations entered into by the City to determine whether they constitute a material “financial obligation.” The SEC has not provided specific guidance on what constitutes a “material” financial obligation. As a general guideline, the City may consider a financial obligation to be material if it involves an annual repayment amount which is in excess of one percent (1%) of the total annual sources of such repayment. However, the foregoing is a guideline and City staff should analyze each financial obligation for materiality base d on a totality of the circumstances.
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: City Disclosure Policy POLICY
NUMBER EFFECTIVE
DATE
PAGE
220-07 June 21,
201611/12/202
4 12 of 114
ADOPTED BY: Resolution No. 2016-127 DATED: 6/21/2016 AMENDED BY: Resolution No. 2024-___ (11/12/2024)