C

California Constitution

• i.4.3 Steps Public Agencies Must Take to Use Debt Financing
• 1.1 A Public Agency’s Authority to Borrow
  This chapter provides an overview of the statutory and legal framework within which California local public agencies may incur debt and obtain the funds needed to repay it.
• A.1 California Consitutional Provisions Relating to Local Public Agency Debt

• authority to borrow
  • 1.1 A Public Agency’s Authority to Borrow
    This chapter provides an overview of the statutory and legal framework within which California local public agencies may incur debt and obtain the funds needed to repay it.
  • 1.5 Charter Cities
  • 3.3.1 Local Agency General Obligation Bonds
    General obligation bonds (GO bonds) issued by California local government entities are payable from unlimited ad valorem taxes on real property
  • 3.3.7.1 Assessment Bonds
    Local governments issue assessment bonds to pay for public infrastructure that confers a special benefit upon real property and are payable from assessments imposed on the real property.
  • 3.3.9.4 Education
    A type of conduit financing used to finance educational facilities operated by non-profit organizations.
  • 3.9.1 State General Obligation Bonds
  • B.1.1.2 Proposition 13
• authority to tax
  • General Tax
  • 1.4 Local Government Revenue Sources -Security for and Repayment of Debt
    Sources of revenue available to local governments to repay debt obligations.
  • 3.3.3 Sales Tax Revenue Bonds
    Debt obligations that are payable from and secured by revenues from the imposition of a sales and use tax, or a transaction and use tax, on retail transactions
• charter cities
  • Charter City
  • i.4.3 Steps Public Agencies Must Take to Use Debt Financing
  • 1.1.1 Statutory Authority to Borrow
    All public agencies are subject to the California Constitution and the powers granted to them or that are essential to their purpose.
  • 1.1.3 Borrowing Authority of Charter Cities
    Authority to borrow provided to charter cities by their charter.
  • 1.2.3 Scope of Debt Limit – When Does the Debt Limit Apply?
  • 1.5 Charter Cities
• debt limit
  • Debt Limit
  • i.4.3 Steps Public Agencies Must Take to Use Debt Financing
  • 1.2 Constitutional Debt Limit
    The California Constitution places limits on the ability of certain public agencies to incur debt, referred to as the Debt Limit
  • 2.1 Overview
    Factors determining structure, including issuer, term, source of repayment, and debt limits.
  • B.1.3.1 Local General Obligation Bonds
  • Figure B-1 Statutory Debt Limits
    
• purpose
  • 1.2.2 Purpose of Debt Limit
• scope
  • 1.2.3 Scope of Debt Limit – When Does the Debt Limit Apply?
• debt limit exceptions
  • Debt Limit Exceptions
  • i.4.3 Steps Public Agencies Must Take to Use Debt Financing
  • 1.2.4 Exceptions to the Debt Limit
    California courts recognize several exceptions to the constitutional debt limit.
  • 3.3.4 TRANs and RANs
    Tax and revenue anticipation notes (TRANs) and revenue anticipation notes (RANs) may be used to finance current fiscal year expenses.
  • 3.6.1 Financing Leases
    The public agency obtains financing by entering into a lease for which it makes rental payments
  • 3.9.3 Revenue Anticipation Notes
    Revenue Anticipatin Notes (RANs) are used to manage cash flow and are paid from tax and other revenues received by the State later in the fiscal year.
  • 3.3.2.1 Lease Revenue Bonds and Certificates of Participation
    
    
• debt limit strategies
  • i.4.3 Steps Public Agencies Must Take to Use Debt Financing
  • 1.3 Common Strategies for Avoiding the Debt Limit
    Public agencies may consider various legally permitted financing strategies for issuing debt obligations that do not cause the agency to violate the constitutional debt limit.
  • 2.3.2.4 Lines of Credit and Standby Bond Purchase Agreements
    Liquidity Support: Lines of Credit
  • 3.1.4 Unique Public Agency Financings that Address Legal Constraints or Public Policy Issues
    California public finance professionals have structured some types of debt to address special legal constraints.
    
• local revenue sources
  • Local Revenue Sources
  • 1.4 Local Government Revenue Sources -Security for and Repayment of Debt
    Sources of revenue available to local governments to repay debt obligations.
• prohibition of gift of public funds
  • 7.3 Prohibition of Gift of Public Funds
    Prohibitions imposed on a public agency from making any gift of public funds or from lending its public credit to any person.
• revenue categories
  • 1.4.1 Determining the Category of Revenues
    Differentiating “taxes,” “assessments” and “fees and charges.”
  • Figure 1-1 Public Agency Revenue Sources by Category
• swaps
  • 2.3.3 Interest Rate Swaps and Synthetic Structures
    Changing the substantive financial terms of a debt from a fixed-rate obligation to a variable-rate obligation
• tax-exempt bonds provision
  • 4.1 California Tax Exemption
    State statutes providing for the issuance of bonds generally provide for the exemption of interest on the bonds from State of California personal income taxes, regardless of the federal income tax status of the bonds.

California Debt and Investment Advisory Commission(CDIAC)

• California Debt and Investment
• 7.1 Reporting to the California Debt and Investment Advisory Commission
  Compliance with California Government Code 8855 et. seq.

• Annual Debt Transparency Report
  • i.5.2.5 Reports to the California Debt Investment and Advisory Commission
  • 7.1.3 Annual Debt Transparency Report
• certification of local debt policies
  • 7.1.1 Report of Proposed Debt Issuance
• debt reporting
  • i.4.4 Additional Legal Requirements – Internal Boards, Reporting to CDIAC, and Voter Approval
  • i.5.2.5 Reports to the California Debt Investment and Advisory Commission
  • 7.1 Reporting to the California Debt and Investment Advisory Commission
    Compliance with California Government Code 8855 et. seq.
• Mark-Roos Reports
  • i.5.2.2 Marks- and Mello-Roos Bonds
  • 7.1.5 Marks-Roos Reports
• Mello-Roos CFD Reports
  • i.5.2.2 Marks- and Mello-Roos Bonds
  • 7.1.4 Mello-Roos Community Facilities District Reports
• Report of Final Sale
  • i.5.2.5 Reports to the California Debt Investment and Advisory Commission
  • 7.1.2 Report of Final Sale
• Report of Proposed Debt Issuance
  • i.5.2.5 Reports to the California Debt Investment and Advisory Commission
  • 7.1.1 Report of Proposed Debt Issuance

California Debt Limit Allocation Committee (CDLAC) annual filings

• 7.2.7 California Debt Limit Allocation Committee Reports
• 4.7.2.1 Volume Cap
  Requirements of private activity bonds
• C.2 Regulatory Resources

• volume cap
  • 4.7.2.1 Volume Cap
    Requirements of private activity bonds

California Environmental Quality Act (CEQA)

• California Environmental Quality Act (CEQA)
• 7.4 California Environmental Quality Act
  Requirements imposed by California law on public agencies that approve or carry out “projects” that may have an impact on the environment.

California securities laws

• 6.5.1 California State Securities Laws

call provisions

• Call
• Call Protection
• 2.3.1.3 Optional Redemption
  Optional redemption of principal
• 5.2.2 Disadvantages of a Competitive Sale

capital appreciation bonds

• Capital Appreciation Bonds
• 2.2.2.1 Long-Term, Fixed-Rate Debt
• 3.3.1 Local Agency General Obligation Bonds
  General obligation bonds (GO bonds) issued by California local government entities are payable from unlimited ad valorem taxes on real property
• B.1.3.1.2 GO Bond Structures

capital expenditures

• Capital Expenditures
• i.4.5.3 Requirement #3 – Manage the arbitrage rules
• 4.4 Capital Expenditure Financings
  Proceeds of tax-exempt bonds will only be treated as spent when used to finance or reimburse capital expenditures.

• working capital expenditures
  • 4.5 Cash Flow Borrowings
    Public agencies may find themselves temporarily short of cash to finance operations and may need to address the shortfall with a short-term financing called a “cash flow borrowing.”
  • 4.8.2.2 Expenditure of Gross Proceeds

capital improvement planning and budgeting

• i.1.4.2 Capital Improvement Planning and Capital Improvement Budgeting
• 7.1.1 Report of Proposed Debt Issuance

capitalized interest

• Capitalized Interest (Funded Interest)
• 4.4.3 Capitalized Interest
  Capitalized interest pursuant to the Tax Code.

capitalized interest fund

• 9.2.2 Capitalized Interest Fund
  Types of bond funds that may be invested by the issuer.
• 9.5.2 Investment Considerations
  Issuer considerations regarding investment of bond funds.

captive pools

• 3.7.7 Pool Bonds
  Pool bonds are bonds issued to purchase the underlying bonds issued by pool members. TRANS are an example of a pool bond.
• Figure 3-7 Marks-Roos Captive Pool

cash flow borrowings

• Cash Flow Financing
• 4.4 Capital Expenditure Financings
  Proceeds of tax-exempt bonds will only be treated as spent when used to finance or reimburse capital expenditures.
• 4.5 Cash Flow Borrowings
  Public agencies may find themselves temporarily short of cash to finance operations and may need to address the shortfall with a short-term financing called a “cash flow borrowing.”

certificates of participation (COPs)

• Certificate of participation (COP)
• 1.3.1 Lease Revenue Bonds and Certificates of Participation
  Debt obligation structured to comply with the Lease exception to the Constitutional debt limit.
• 3.1.4 Unique Public Agency Financings that Address Legal Constraints or Public Policy Issues
  California public finance professionals have structured some types of debt to address special legal constraints.
• 3.2.3 Lease-Supported Debt
  Lease-supported debt represents a blend of direct debt and debt issued on behalf of another entity.
• 3.3.2.1 Lease Revenue Bonds and Certificates of Participation
• 3.6.1 Financing Leases
  The public agency obtains financing by entering into a lease for which it makes rental payments
• 3.6.2 Installment Sale Agreements
  Installment sale agreement financings are based on a public agency’s legal authority to purchase property and to appropriate annual funds to meet this obligation.
• 3.6.3 Certificates of Participation
  A debt obligation that involve selling the right to receive the payments under a lease agreement to other parties.
• B.1.3.3 Certificates of Participation/Leases
• B.1.5.3 Refunding Bonds
  

charges

• 1.4 Local Government Revenue Sources -Security for and Repayment of Debt
  Sources of revenue available to local governments to repay debt obligations.
• 3.3.2 General Fund Obligations
  Debt obligations backed by a public agency’s general fund.
• 3.3.6.1 Public Enterprise Revenue Bonds

• voter-approved limitations
  • 1.7.1 Proposition 13 (1978), Jarvis-Gann Initiative

charter cities

• Charter City
• Municipal Affairs
• i.4.3 Steps Public Agencies Must Take to Use Debt Financing
• 1.1 A Public Agency’s Authority to Borrow
  This chapter provides an overview of the statutory and legal framework within which California local public agencies may incur debt and obtain the funds needed to repay it.
• 1.1.3 Borrowing Authority of Charter Cities
  Authority to borrow provided to charter cities by their charter.
• 1.2.3 Scope of Debt Limit – When Does the Debt Limit Apply?
• 1.5 Charter Cities

charter city financing

• 1.5.2 Charter City Financing
  How the authority of a charter city may affect its debt financings

charter city powers

• 1.5.1 Charter City Powers – Municipal Affairs vs. Statewide Concerns
  Basis of authority provided to charter cities

chief compliance officer

• 8.2.1 Establishing a Compliance Program
  Recordkeeping essential to maintaining tax-exempt status of bonds.

closed pool

• 3.7.7 Pool Bonds
  Pool bonds are bonds issued to purchase the underlying bonds issued by pool members. TRANS are an example of a pool bond.
• Dedicated Pool

collateralization risk

• 2.3.3 Interest Rate Swaps and Synthetic Structures
  Changing the substantive financial terms of a debt from a fixed-rate obligation to a variable-rate obligation

commercial paper (tax-exempt)

• Commercial Paper (CP)
• i.4.2.7 Decision #7 – Evaluate municipal market opportunities to use debt financing
• 3.3.5 Teeter Bonds
  Teeterbonds are secured by a pledge of the delinquent property tax receivables and are generally also payable from the county’s general fund.
• 3.4.3 Commercial Paper
  A debt obligation that involves the issuance and marketing of short-term notes.
• 5.5.3 Alternative Financing Considerations
  Issuer considerations when using alternative financing, which typically includes bank loans, direct-purchase bonds, and other types of privately placed debt

competitive sale

• Competitive Sale
• Award
• Bidding Limitations
• Bond Purchase Contract or Agreement
• Electronic Bid
• Good Faith Deposit
• Notice of Sale
• Public Offering
• Public Sale
• True Interest Cost (TIC)
• i.4.1.1 Pre-Issuance Phase
• 3.8 Joint Exercise of Powers Agencies
  A joint exercise of powers agency or authority (JPA) is a separate governmental entity formed by two or more governmental entities.
• 5.1 What is a public offering?
  Characteristics defining a public sale of debt.
• 5.1.1 Sale Methods – Competitive or Negotiated Sale
• 5.2 Competitive Sales
  The sale of debt using a competitive pricing approach.
• 5.4.2 Underwriting Fees and Expenses
• 6.2.1 Municipal Advisors and Underwriters
• 6.3 The Official Statement
  The offering document in a public offering of municipal securities.
• A.6 General Bond Statutes

conduit financing

• Conduit Financing
• i.5.2.3 Conduit Issuer Reporting
• 3.1.5 Purposes for Which Debt is Incurred
• 5.5 Private Placements
  Private placements are sale transactions in which the issuer sells the entire issue of debt to a single or to a limited number of investors.
• 8.2.7 Audit Review
  Recordkeeping essential to maintaining tax-exempt status of bonds.
• B.1.6.1 Charter School Facilities
• B.1.6.2 Nonprofit and Religious School Facilities (See “conduit revenue bonds”)
• A.7 Other Helpful Statutes

• borrower/obligor
  • 2.4.2 Source of Payment; Pledge
    The pledge of revenues securing the debt obligation
  • 2.4.8 Events of Default and Remedies
    Actions to be taken in events of default and the remedies to be applied
  • 3.2.2 Debt Obligations Issued on behalf of a Borrower
    With debt issued on behalf of another borrower, the issuer is neither the recipient of the proceeds nor, in most cases, the source of repayment.
  • 3.3.9 Conduit Revenue Bonds
    “Conduit financings” involve bonds issued by governmental entities to finance projects for nongovernmental borrowers.
  • 4.7.2.5 Cost of Issuance Limit
    Requirements of private activity bonds
  • 4.8.2.2 Expenditure of Gross Proceeds
  • 5.6 Credit Ratings
    Credit ratings reflect the opinion of the credit rating agency as to the probability that interest or principal payments on a security will not be paid in full and on time.
  • 6.3.4 Transactions with Credit or Liquidity Support
    The OS must include a description of the terms of that credit or liquidity support and disclosure regarding the credit or liquidity provider
  • 6.3.5 Conduit Offerings
    What information should be included regarding the conduit issuer in the OS.
  • 8.4.1 Annual Reports
    Annual financial reports submitted as a part of continuing disclosures made by issuers.
  • 8.4.2 Event Notices
    Event notices required by SEC Rule 15c2-12.
  • 8.4.3 Exceptions to Rule 15c2-12 Continuing Disclosure Requirements
  • 9.3.2 Bond Document Provisions (See “nongovernmental borrower”)
    Role of bond documents in the investment of bond funds.
    
• issuer
  • 3.2.2 Debt Obligations Issued on behalf of a Borrower
    With debt issued on behalf of another borrower, the issuer is neither the recipient of the proceeds nor, in most cases, the source of repayment.
  • 3.3.9 Conduit Revenue Bonds
    “Conduit financings” involve bonds issued by governmental entities to finance projects for nongovernmental borrowers.
  • 5.4.1 Direct Costs of Issuance
  • 5.6 Credit Ratings
    Credit ratings reflect the opinion of the credit rating agency as to the probability that interest or principal payments on a security will not be paid in full and on time.
  • 6.1 Federal Securities Laws
    While municipal securities are exempt from the registration requirements of federal securities law, they are subject to other rules.
  • 6.3.5 Conduit Offerings
    What information should be included regarding the conduit issuer in the OS.
  • 7.1.1 Report of Proposed Debt Issuance
  • 7.2.1 Local Bond Disclosures
  • 8.1 A Framework for Managing Bond Funds
    An approach to managing bond proceeds.
  • 8.2.7 Audit Review
    Recordkeeping essential to maintaining tax-exempt status of bonds.
  • 8.3.1 Post-Issuance Tax Compliance Programs
  • 8.3.3 Monitoring Use of Bond-Financed Property
  • 8.3.4 Monitoring Investment Income and Arbitrage Compliance
  • 8.4.3 Exceptions to Rule 15c2-12 Continuing Disclosure Requirements
  • 9.3.2 Bond Document Provisions
    Role of bond documents in the investment of bond funds.
  • C.4 State Finance and Joint Powers Authorities with Statewide Jurisdiction
• issuer reporting
  • i.5.2.3 Conduit Issuer Reporting
• offerings
  • 6.3.5 Conduit Offerings
    What information should be included regarding the conduit issuer in the OS.
  • 9.3.2 Bond Document Provisions
    Role of bond documents in the investment of bond funds.

conduit revenue bonds

• Conduit Financing
• Private Activity Bonds
• Qualified Private Activity Bonds
• 3.3.9 Conduit Revenue Bonds
  “Conduit financings” involve bonds issued by governmental entities to finance projects for nongovernmental borrowers.

conflicts of interest

• 5.6.1 What Credit Ratings Mean
• 6.1.4 SEC Enforcement Actions
  Review of important enforcement actions against public agencies.
• 6.2.1 Municipal Advisors and Underwriters
• 6.2.2 Attorneys
• A.6 General Bond Statutes

constitutional limitations

• 1.4.3 Ad Valorem Real Property Taxes
  Sources of Revenues securing debt obligations: Ad Valorem tax defined
• 1.4.7 Assessments (See “California Constitution”)
  Sources of Revenues securing debt obligations: Assessments defined

• ad valorem property taxes
  • 1.4.3 Ad Valorem Real Property Taxes
    Sources of Revenues securing debt obligations: Ad Valorem tax defined
• assessments
  • 1.4.7 Assessments
    Sources of Revenues securing debt obligations: Assessments defined
• charter city financing
  • 1.5.2 Charter City Financing
    How the authority of a charter city may affect its debt financings
• charter city powers
  • 1.5.1 Charter City Powers – Municipal Affairs vs. Statewide Concerns
    Basis of authority provided to charter cities
• credit enhancement
  • 2.3.2 Credit Enhancement and Liquidity Support
    Use of credit enhancements and liquidity guarantees to lower risk and attract investors.
• Debt Limit
  • 1.2 Constitutional Debt Limit
    The California Constitution places limits on the ability of certain public agencies to incur debt, referred to as the Debt Limit
• managing bond funds
  • 8.1 A Framework for Managing Bond Funds
    An approach to managing bond proceeds.
• property related fees and charges
  • 1.4.9 Property-Related Fees and Charges
    Sources of Revenues securing debt obligations: Property-related fees and charges defined

construction fund (See “project fund”)

contingent obligation exception

• Contingent Obligation
• 1.2.4 Exceptions to the Debt Limit
  California courts recognize several exceptions to the constitutional debt limit.
• 1.2.4.3 Lease Exception (the “Offner-Dean Lease Exception”)
  Debt limit exception based upon a debt obligation structured as a lease financing
• 1.2.4.5 Contingent Obligation Exception
  Debt limit exception depends upon the fact that the public agency’s obligation to make payments from the income and revenue of a future fiscal year is contingent.

costs of issuance

• Costs of Issuance (COI)
• 4.4.2 Costs of Issuance
  Cost of issuance pursuant to the Tax Code.
• 5.4 Costs of Issuance
  The costs of issuance (COI) are the expenses paid by or on behalf of the issuer in connection with the sale and issuance of publicly offered bonds.

• direct costs of issuance
  • 5.4.1 Direct Costs of Issuance
• eligible costs
  • 5.3.3 Documentation for a Negotiated Public Offering
• limit applicable to qualified private activity bonds
  • 4.7.2.5 Cost of Issuance Limit
    Requirements of private activity bonds
• underwriting fees and expenses
  • 5.4.2 Underwriting Fees and Expenses
• refunding bonds costs of issuance
  • B.1.5.3 Refunding Bonds

covenants

• Covenants
• 2.4.5 Covenants (See “legal documents”)

credit enhancement

• Credit Enhancement
• 2.3.2 Credit Enhancement and Liquidity Support
  Use of credit enhancements and liquidity guarantees to lower risk and attract investors.
• 6.3.4 Transactions with Credit or Liquidity Support
  The OS must include a description of the terms of that credit or liquidity support and disclosure regarding the credit or liquidity provider

credit enhancement provider

• 2.3.2 Credit Enhancement and Liquidity Support
  Use of credit enhancements and liquidity guarantees to lower risk and attract investors.

credit facility

• Liquidity Facility or Liquidity Support
• Figure 2-1 Basic Cash Flow for a Variable-Rate Demand Obligation or “VRDO”
• 5.5.2 Direct Loans
• 6.3.4 Transactions with Credit or Liquidity Support
  The OS must include a description of the terms of that credit or liquidity support and disclosure regarding the credit or liquidity provider
• 9.2.3 Debt Service Reserve Fund (See “liquidity support”)
  Types of bond funds that may be invested by the issuer.

credit ratings

• Credit Rating
• 5.6 Credit Ratings
  Credit ratings reflect the opinion of the credit rating agency as to the probability that interest or principal payments on a security will not be paid in full and on time.

credit risk

• 2.1 Overview
  Factors determining structure, including issuer, term, source of repayment, and debt limits.
• 2.3.3 Interest Rate Swaps and Synthetic Structures
  Changing the substantive financial terms of a debt from a fixed-rate obligation to a variable-rate

• index debt
  • 3.4.2.1 Index Debt
    The interest rate payable on a debt obligation is adjusted periodically in accordance a published index.
• financing lease
  • 3.6.1 Financing Leases
    The public agency obtains financing by entering into a lease for which it makes rental payments
• pool bonds
  • 3.7.7 Pool Bonds
    Pool bonds are bonds issued to purchase the underlying bonds issued by pool members. TRANS are an example of a pool bond.
• credit ratings
  • 5.6 Credit Ratings
    Credit ratings reflect the opinion of the credit rating agency as to the probability that interest or principal payments on a security will not be paid in full and on time.
  • 5.6.1 What Credit Ratings Mean

current fiscal year exception

• Debt Limit Exceptions
• 1.2.4 Exceptions to the Debt Limit
  California courts recognize several exceptions to the constitutional debt limit.
• 1.2.4.1 Current Fiscal Year Exception
  Debt limit exception based on the fact that the public agency can pay the debt with funds it already has or will receive during the current fiscal year.
• 1.2.4.2 Annual Appropriation Exception
  Debt limit exception based upon the source of repayment being an annual appropriation made by the public agency.
• 3.3.4 TRANs and RANs
  Tax and revenue anticipation notes (TRANs) and revenue anticipation notes (RANs) may be used to finance current fiscal year expenses.
• 3.9.3 Revenue Anticipation Notes
  Revenue Anticipation Notes (RANs) are used to manage cash flow and are paid from tax and other revenues received by the State later in the fiscal year.