What Information Does the Guide Include?
Public agencies have a number of options when financing capital improvements and managing their cash flow, including relying on existing resources or operational surpluses. In some cases and under certain conditions, debt financing is both the most economical and sensible means of financing both short-term and long-term purposes. But there are business, economic, legal, and practical concerns to be affirmatively considered and addressed in any decision to use debt financing.
The Introduction addresses the five principal responsibilities of public agencies choosing debt financing:
i.1 Understand Your Public Agency; i.2 Decide Whether Debt Financing Is Appropriate For Your Agency; i.3 Apply the Appropriate Analysis to the Decision to Use Debt Financing; i.4 Lead the Process of Issuing Your Debt; i.5 Manage Your Debt After It Is Issued. The discussion of each of these points serves as an introduction to the process of debt financing. The Introduction, as a result, is the starting point for those unfamiliar with debt financing by public agencies as well as those seeking to better understand the scope of the process and obligations that fall on public agencies using debt financing. If you are an elected or appointed official, public agency staff new to debt financing, or member of the public seeking to understand how public agencies finance projects or how and why your agency has taken a particular approach to financing a project with debt, you are encouraged to start with the Introduction before moving on to the remainder of the Guide.
The Guide provides readers an understanding of the “legal and regulatory” requirements of debt financing in California. It begins in Chapter 1 with a discussion of the Constitutional and statutory authority given to public agencies to issue debt and to receive revenues needed to repay the debt and restrictions of that authority. Chapter 2 addresses the structural features of debt, including the source of revenues for repayment, security, and the term and interest rate mode. Chapter 3 provides a new approach to identifying debt “types” by categorizing them according to the security and source of repayment, interest rate mode (fixed- or variable-rate), and tax treatment. Chapter 4 covers the federal tax law requirements for issuing tax-exempt debt. Chapter 5 discusses the process of selling public debt to investors. Chapter 6 focuses on federal securities laws administered by the Securities and Exchange Commission as well as rulemaking by the Municipal Securities Rulemaking Board. Chapter 7 covers the additional requirements issuers of public debt must meet, including reports to CDIAC and the California Environmental Quality Act. Chapter 8 explains the on-going administrative responsibilities of issuers to investors, regulators, and the public. Chapter 9 introduces the options public agencies have to invest bond proceeds and the limitations they must adhere to when investing these funds.
The Guide also includes six appendices. Appendix A is a listing of state laws pertaining to the use of debt by California public agencies. Appendix B takes an in-depth look at one financing common to the California bond market: K-12 school financing. Appendix C is a listing of additional resources and reference materials. Appendix D is a discussion of the process public agencies must take when seeking bankruptcy protection under the Chapter 9 of the U.S. Bankruptcy Code. Appendix E is a glossary of terms. Appendix F is a subject index.