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MSRB Education Materials
The Municipal Securities Rulemaking Board has made educational materials available on the upcoming changes to MSRB Rule G-17. This rule states in the conduct of its municipal securities or municipal advisory activities, each broker, dealer, municipal securities dealer, and municipal advisor shall deal fairly with all persons and shall not engage in any deceptive, dishonest, or unfair practice. The new requirements for underwriters, which are effective August 2, 2012, are outlined in an interpretive notice on MSRB Rule G-17.
The requirements include explicit and expanded requirements for underwriters aimed at protecting state and local governments that issue municipal bonds. The new rules create affirmative obligations for underwriters to ensure that municipal bond issuers have the information they need to make informed decisions. Examples of subjects addressed in MSRB Rule G-17 include a basic fair dealing principle, role of the underwriter/conflicts of interest, disclosures concerning the underwriter's role, disclosure concerning the underwriter's compensation, timing and manner of disclosures, and acknowledgement of disclosures.
Click on this link to view theaccess the educational materialson MSRB Rule G-17.
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Community Development Agency Maximizes TIF for Housing
Leveraging private investment in affordable housing. That was the main factor driving the Dakota County Community Development Agency (CDA) when it began developing workforce family housing 20 years ago. Since then, 19 developments have been completed providing 648 affordable rental townhomes for working families.
Each townhome development is owned by a public-private partnership that uses the federal low income housing tax credits. Typically 50 - 75% of the development costs are paid for by private corporations who invest to obtain the tax credits.
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Ehlers Market Commentary
Are you up to date with current market trends? If not, be sure to check out the Ehlers Market Commentary, which is released every other week.
Be sure to sign up to receive your email copy, or read past articles here.
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Ehlers 3060 Centre Pointe Drive
Roseville, MN 55113
Phone: 651-697-8500
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Greetings!
In this issue of The Advisor, we have two articles related to Tax Increment Financing. One deals with interfund loans and TIF districts, while the other discusses how the Community Development Agency maximizes TIF for Dakota County housing. And the DNR is implementing a new law that gives water utilities more rate-setting options.
Also, a number of Ehlers clients have received a Municipal Derivative Antitrust Litigation notification. We take a brief look at what that means to you.
By way of informational resources for you, the Municipal Securities Rulemaking Board has released education materials on the upcoming Rule G-17, and we share highlights from The Bond Buyer including the recent national Government Finance Officers Association conference held in Chicago.
Steve Apfelbacher
President and CEO
sapfelbacher@ehlers-inc.com
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Municipal Derivatives Antitrust Litigation
A number of Ehlers clients have received a notification that has been released in the Municipal Derivatives Antitrust Litigation, which concerns the sale of municipal derivative transactions in the United States from January 1, 1992 through August 18, 2011.
Municipal derivatives are financial products used by issuers of tax-exempt municipal bonds (such as states, cities, counties, or their agencies), or by tax-exempt, non-profit private entities, to invest the money received from bond offerings while they are waiting to spend it. Municipal derivatives come in many varieties. Some of the more common types are:
- Guaranteed investment contracts
- Interest-rate swaps
- Options
- "Swaptions"(a combination of a swap and an option)
- Interest-rate floors
- Collars
The focus of the lawsuit relates to bid-rigging in the sale of municipal derivatives by several companies including Morgan Stanley, JP Morgan Chase & Co., Wachovia Bank, N.A. (Wells Fargo Bank, N.A.) and others. Notices of this nature are often sent to any person or entity that may have been a party to the transaction(s) mentioned. If you received this notice, it is possible that you, or an agent on your behalf, may have temporarily reinvested bond proceeds in a municipal derivatives product with one or more of these financial institutions. A partial settlement of the class action has been reached with Morgan Stanley. There are proposed settlements regarding the sale of municipal derivatives by JP Morgan and Wells Fargo Bank N.A./Wachovia Bank, N.A.
The lawsuit continues against the other Defendants, so please check the Municipal Derivatives Settlement website and look for further information in the mail to help you decide whether or not to participate in any claims or settlements relating to the named Defendants
As always, please contact an Ehlers Advisor with any questions.
Click here to read more about the litigation and settlements.
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Interfund Loans and TIF Districts
Tax increment financing continues to be the most reliable tool for local governments to assist real estate projects. When all of the dust settles after a TIF district is established and the development agreement is signed, the important part of TIF begins - administration of TIF districts.
We cannot emphasize enough that one of the most important components of TIF is a proper interfund loan resolution and documentation of the obligation in the Authority's financial statements.
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New Law Gives Water Utilities More Rate-Setting Options
The State Legislature has provided public water utilities more flexibility in setting water rates.
The prior law, adopted in 2010, required most cities to adopt water conservation rates by the end of the year. The new law, intended to provide regulatory relief, extends the deadline until 2015, and allows more rate structures to comply with the law.
Utilities must adopt water demand reduction measures that will reduce water demand, water losses, and peak water consumption. According to the DNR, these measures can include strategies a city may already employ, such as time of day sprinkling regulations, meter repair and replacement programs, or water conservation education efforts.
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Public Finance in the News - Highlights from National GFOA and The Bond Buyer Articles
Minnesota was well represented at the National GFOA Conference in Chicago in June, and we enjoyed seeing you at our booth and at the receptions. There were several topical items discussed at the Conference that were written about in GFOA Today and/or published by The Bond Buyer. Here are some highlights of newsworthy articles.
MSRB Urges Issuers to Disclose Information About Bank Loans
Government Finance Officers Association (GFOA) debt committee members urged municipal issuers to consider voluntarily disclosing information about their bank loans on Electronic Municipal Market Access (EMMA). This stems from the Municipal Securities Rulemaking Board (MSRB) urging municipal bond issuers to voluntarily post information about their bank loan financings on the EMMA system in April.
Read more of the article by Jonathan Hemmerdinger here.
Revisiting Best Practices for Taxable Debt Sales
The Government Finance Officers Association's debt committee updated its 14-year-old best-practices document on issuing taxable municipal debt. The best practices document outlines what states and local governments should consider when deciding whether to issue taxable or tax-exempt bonds was last updated in 1998. The updated document reminds issuers that there may be state law requirements that apply equally to taxable and tax-exempt deals.
More information on all of GFOA's best practices can be found here.
Pension Disclosure: One Size Does Not Fit All
The Government Finance Officers Association moved closer to issuing a pension disclosure best-practices paper when the group's committee on governmental debt management approved changes to its latest draft. The debt committee agreed to alter the document so that it better reflects other types of retirement plans used by municipalities, such as defined-contribution 401(k) plans and deferred-compensation 457 plans. GFOA's document follows a 28-page best-practices paper about pension disclosure released by the National Association of Bond Lawyers.
To read the entire article written by Jonathan Hemmerdinger, click here. IRS to Start Audits of Bans, Arbitrage Rebate Form Filings The Internal Revenue Service is beginning limited-scope examinations of bond anticipation notes in July and the examinations of filed 8038-T forms on arbitrage rebate later in 2012. The IRS has begun sending out letters for 25 bond anticipation note examinations as part of their ongoing effort to focus on compliance with arbitrage rules and regulations. Closely following the start of its new fiscal year, which begins Oct. 1, the IRS will send out examinations focused on filed 8038-T forms, which must be filed if issuers have to pay rebates on their bond issues. As part of its fiscal 2012 work plan, the IRS is currently sending out audit letters where no 8038-T forms were filed to determine if the filings did not have to be made. To read more of the article written by Jennifer DePaul, click here.
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