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Public Finance Client Alert

February 2, 2016

Continuing Disclosure Information Reporting Deadline Draws Near

by Timothy J. Horstmann

Municipalities, school districts, and other public entities that borrow money – whether through public offerings of bonds or private bank loans – generally are required to provide updated financial and operational information at regular intervals following closing. The disclosure of such information is generally tied to the fiscal year of the public entity, such that the information must be provided within a specified number of days following the end of the fiscal year. With a reporting deadline approaching, public officials are encouraged to review the status of their reporting obligations and consult with legal and financial professionals as needed to ensure compliance.

In public bond issuances, public entities will sign a continuing disclosure certificate, pursuant to which they will agree to update certain financial and operational information (e.g., audited financial statements, budgets, and information about the imposition and collection of taxes which fund operations) originally provided in the offering document pursuant to which the bonds were sold.

In private bank loans, public entities will often covenant in connection with the loan to provide similar financial and operational information directly to the lender. Such covenants are often set forth in a loan agreement or similar instrument signed by the borrower.

While reporting deadlines will vary depending on the credit rating of the public entity, the particular underwriter or lender in the transaction, etc., it is not uncommon to see deadlines as early as 180 to as late as 270 days after the end of the fiscal year. A public entity that fails to meet its disclosure deadlines may be required to file material event notices with the Municipal Securities Rulemaking Board, to disclose the violation of its continuing disclosure obligations. In the private bank loan context, the failure to meet a reporting deadline may result in a technical default by the public entity of the loan documentation.

Public officials are encouraged to consult with their financial advisors and legal counsel to ensure that the required information is provided before the deadline. If a deadline is missed, the officials should work to fix the issue as quickly as possible to avoid negative repercussions on the public entity’s ability to borrow in the future.

Timothy J. Horstmann is a public finance attorney with the law firm of McNees Wallace & Nurick LLC, Harrisburg, Pennsylvania, and advises municipalities, school districts and other public entities in connection with the issuance of taxable and tax-exempt bonds and notes.