i.5.1 Managing Your Agency’s Debt Financings

Securities laws are intended to provide a fair and efficient market that ensures access to capital for borrowers and the ability for investors to properly price risk. The tax exemption that provides public agencies a lower cost of financing for essential services and capital improvements also requires issuers to demonstrate public benefit and compliance with rules on the use of proceeds. The public agency, under the direction of its elected and administrative leadership, should develop and follow procedures and policies that ensure compliance with all legal and administrative requirements and guard against the negative consequences of regulatory actions taken by the SEC and IRS or civil actions brought by investors, taxpayers, or others. The procedures should include certain key components, among them the following:

Clear delegation of duties and roles

Staff training and technical support to designated officials

Due diligence reviews at regular intervals

Centralized recordkeeping and retention policies

Procedures reasonably expected to identify noncompliance promptly

Procedures ensuring that the issuer will take steps to correct noncompliance promptly

The agency’s policies should define both the direction and outcome of the procedures, that is, the work conducted by staff and service providers to meet legal and regulatory requirements. Often times, policies and procedures are combined in a single document. The most common policies adopted by public agencies to administer their debt are (1) debt management policies, (2) disclosure policies, and (3) investor relations policies.