2016-05-09-minutes-public-works-study-session

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Issuance costs for the LID bonds: a bond counsel a underwriting e rating and insurance, if rated or insured a bond printing • official statements and continuing disclosure o closing If there is any doubt as to whether a cost should or legally can be included, check with the financing team members, particularly bond counsel and the financial advisor. Some costs may be customarily absorbed by individual municipalities. That is an individual choice. ProtecUng a MunicipalAys funds If property owners fail to make assessment payments, the municipality may be required to draw on the guaranty fund or reserves to make debt payments. If the guaranty fund is depleted, the municipalitywill be required to replenish the fund unless the ordinance or resolution underwhich the bonds were issued provides otherwise. Since foreclosure actions can take several years, there may be a significant threat of default on the bonds if provisions are not made to secure the bonds with the guaranty fund or a reserve. Underwriters will likely demand that a sufficient reserve or the guaranty fund be pledged to the payment of the bonds and that provision for replenishment of the guaranty fund or reserve be in force. Default is not acceptable. Default is a dirty word, which can affect the general credit of the municipality, even though it was not technically or legally liable for the debt repayment. To avoid default, it may be necessary to use funds of the municipalityto make payments until the guaranty fund or reserve can be replenished or foreclosure proceeds have been obtained. Consideration of this possibility should be made in the formation stages of the LID process. There are several ways the municipality can protect itself from such occurrences. These include among others: • Increase the size of the existing guaranty fund or reserve using financing proceeds (backed by the assessments) or municipal funds; • Avoid LIDs with single or few property owners; • Avoid LI Ds with largely undeveloped properties; • Only create LIDs in which properties have a high assessed or market valuation to assessment ratio; • Create stiff penalties for assessment delinquencies; • Have a reputation for aggressively collecting and foreclosing; • Avoid projects that are too big and expensive. Statutes have been created which affect the establishment and use of the guaranty fund for an LID. Prior to the formation of the LID, the use of the guaranty fund should be determined and the appropriate 'egai language for its use established. Bond counsel should provide this advice Local and Road Improvement Qistricts Manual for Washington State Sixth Edition 47