Debt Management

• Best Practices

  Issuer’s Role in Selec­tion of Under­writer’s Counsel

  GFOA rec­om­mends that Issuers min­i­mize their involve­ment in the selec­tion of underwriter’s coun­sel. How­ev­er, it is appro­pri­ate for the issuer to ensure that underwriter’s coun­sel is com­pe­tent, has no con­flicts of inter­est, and that costs are reasonable.

• Best Practices

  Types of Legal Counsel

  Issuers often engage with a vari­ety of legal advi­sors as part of the financ­ing team when under­tak­ing the issuance of munic­i­pal bonds. Issuers should be aware of the dif­fer­ent roles played by the types of coun­sel involved in a bond trans­ac­tion. In addi­tion, issuers should clear­ly com­mu­ni­cate with the var­i­ous legal advi­sors to deter­mine the scope of ser­vices to be pro­vid­ed by each to avoid dupli­ca­tion or omis­sion of key ser­vices and reduce costs. Issuers should dis­cuss any poten­tial con­flicts of inter­est with the team, espe­cial­ly if one firm is play­ing mul­ti­ple roles in a bond transaction.

• Best Practices

  Select­ing and Man­ag­ing Munic­i­pal Advisors

  Issuers should hire a munic­i­pal advi­sor (MA) pri­or to the under­tak­ing of debt financ­ing unless the issuer has suf­fi­cient in-house exper­tise and access to cur­rent bond mar­ket infor­ma­tion, and issuers should select munic­i­pal advi­sors on the basis of mer­it using a com­pet­i­tive process and that issuers review those rela­tion­ships periodically.

• Best Practices

  Select­ing Bond Counsel

  Issuers should select bond coun­sel on the basis of mer­it using a com­pet­i­tive process and review those rela­tion­ships periodically.

• Best Practices

  Select­ing and Man­ag­ing Under­writ­ers for Nego­ti­at­ed Bond Sales

  Unless the issuer has suf­fi­cient in-house exper­tise and access to cur­rent mar­ket infor­ma­tion, it should hire an out­side munic­i­pal advi­sor pri­or to under­tak­ing a nego­ti­at­ed debt financ­ing in order to assist the gov­ern­ment with eval­u­at­ing pro­pos­als from under­writ­ers, select­ing the underwriter(s) for the trans­ac­tion, and exe­cut­ing the bond sale.

• Best Practices

  Issu­ing Tax­able Debt

  State and local gov­ern­ments should care­ful­ly con­sid­er whether issu­ing tax­able debt is the best financ­ing option for their pro­posed project and devel­op a thor­ough under­stand­ing of the dif­fer­ences between tax-exempt and tax­able mar­kets before pro­ceed­ing with a planned sale.

• Best Practices

  Bank Loans and Direct Placements

  GFOA rec­om­mends that gov­ern­ments, con­sid­er­ing the pos­si­bil­i­ty of enter­ing into bank loans, devel­op poli­cies and pro­ce­dures relat­ed to these debt obligations.

Advisories

• Advisories

  Eval­u­at­ing the Sale and Secu­ri­ti­za­tion of Prop­er­ty Tax Liens

  Gov­ern­ments con­tem­plat­ing the sale or secu­ri­ti­za­tion of prop­er­ty tax liens should under­take a care­ful analy­sis of ben­e­fits and risks both in the cur­rent fis­cal year and over the long-term.

• Advisories

  Use of Debt-Relat­ed Deriv­a­tives Products

  State and local gov­ern­ments should exer­cise cau­tion in the use of deriv­a­tive instruments.

• Advisories

  Pen­sion Oblig­a­tion Bonds

  State and local gov­ern­ments should not issue POBs.

• Advisories

  Using Vari­able Rate Debt Instruments

  Gov­ern­ments who plan to issue vari­able rate debt should exer­cise cau­tion and care­ful­ly eval­u­ate their objec­tives. Gov­ern­ments should con­sid­er how this debt, and the var­i­ous risks asso­ci­at­ed with it, will be man­aged over the long term. 

• Best Practices

  Ten­der Refund­ing of Munic­i­pal Bonds

  GFOA rec­om­mends that orga­ni­za­tions pur­su­ing ten­der refund­ing of munic­i­pal bonds estab­lish poli­cies and pro­ce­dures around the ten­der refund­ing trans­ac­tion that include specific guid­ance on artic­u­lat­ing the intend­ed goals, pick­ing a financ­ing team, cal­cu­lat­ing attrib­ut­able costs, ensur­ing a clear under­stand­ing of fair pric­ing and deter­mi­na­tion of goal attainment.

• Best Practices

  Refund­ing Munic­i­pal Bonds

  Issuers should include guide­lines and cri­te­ria in their debt man­age­ment poli­cies that address when a refund­ing is per­mit­ted based on poten­tial debt ser­vice sav­ings or oth­er cri­te­ria, preser­va­tion of future refund­ing flex­i­bil­i­ty when issu­ing any new mon­ey debt, and mon­i­tor­ing of refund­ing oppor­tu­ni­ties on out­stand­ing debt.

• Best Practices

  Debt Issuance Trans­ac­tion Costs

  Finance offi­cers should be aware of the par­ties like­ly and nec­es­sary to be involved in the trans­ac­tions and be pre­pared to select these par­ties in a man­ner that ensures that need­ed ser­vices are obtained at a fair and rea­son­able cost.

• Best Practices

  Expens­es Charged by Under­writ­ers in Nego­ti­at­ed Sales

  State and local gov­ern­ment issuers should estab­lish at the begin­ning of the bond nego­ti­a­tion process what expens­es will be direct­ly paid by the issuer or as part of the under­writer spread.

• Best Practices

  Issu­ing Tax­able Debt

  State and local gov­ern­ments should care­ful­ly con­sid­er whether issu­ing tax­able debt is the best financ­ing option for their pro­posed project and devel­op a thor­ough under­stand­ing of the dif­fer­ences between tax-exempt and tax­able mar­kets before pro­ceed­ing with a planned sale.

• Best Practices

  Pric­ing Bonds in a Nego­ti­at­ed Sale

  State and local gov­ern­ment issuers strive for the best bal­ance between the yield for each matu­ri­ty and the take­down to achieve the low­est over­all cost of financing.

• Best Practices

  Select­ing and Man­ag­ing Munic­i­pal Advisors

  Issuers should hire a munic­i­pal advi­sor (MA) pri­or to the under­tak­ing of debt financ­ing unless the issuer has suf­fi­cient in-house exper­tise and access to cur­rent bond mar­ket infor­ma­tion, and issuers should select munic­i­pal advi­sors on the basis of mer­it using a com­pet­i­tive process and that issuers review those rela­tion­ships periodically.

• Best Practices

  Using Cred­it Rat­ing Agencies

  Issuers should eval­u­ate the need for obtain­ing one or more cred­it rat­ings and devel­op appro­pri­ate poli­cies and pro­ce­dures for select­ing and man­ag­ing cred­it rat­ing agencies.

• Best Practices

  Select­ing and Man­ag­ing the Method of Sale of Bonds

  Issuers should select a method of sale based on a thor­ough analy­sis of the rel­e­vant rat­ing, secu­ri­ty, struc­ture and oth­er fac­tors per­tain­ing to the pro­posed bond issue.

Advisories

• Advisories

  Under­writer Dis­claimers in Offi­cial Statements

  Issuers should not include under­writer dis­claimer lan­guage in offi­cial statements.

• Best Practices

  “ESG” Best Prac­tice — ​“E” Environmental

• Best Practices

  “ESG” Best Prac­tice — ​“G” Governance

• Best Practices

  “ESG” Best Prac­tice — ​“S” Social

• Best Practices

  Main­tain­ing an Investor Rela­tions Program

  Gov­ern­men­tal bond issuers should con­sid­er devel­op­ing an investor rela­tions pro­gram in con­junc­tion with their con­tin­u­ing dis­clo­sure policy.

• Best Practices

  Under­stand­ing Your Con­tin­u­ing Dis­clo­sure Responsibilities

  Finance offi­cers respon­si­ble for their government’s debt man­age­ment pro­gram should devel­op a thor­ough con­tin­u­ing dis­clo­sure pol­i­cy and adhere to the fol­low­ing best practices.

• Best Practices

  Using Tech­nol­o­gy for Disclosure

  Bond issuers should use tech­nol­o­gy – includ­ing both their own web­sites and addi­tion­al fea­tures of the EMMA plat­form – to dis­sem­i­nate infor­ma­tion to the munic­i­pal secu­ri­ties mar­ket regard­ing their debt, finan­cial con­di­tion and oth­er relat­ed information

• Best Practices

  Pri­ma­ry Mar­ket Disclosure

  Issuers should estab­lish clear poli­cies and pro­ce­dures for com­pil­ing infor­ma­tion before issu­ing debt.

• Best Practices

  Vol­un­tary Disclosure

  This best prac­tice address­es vol­un­tary dis­clo­sure, which is infor­ma­tion an issuer pro­vides to the munic­i­pal mar­ket relat­ing to its oblig­a­tions, cred­it qual­i­ty, or oper­at­ing con­di­tions that is NOT required under any con­tin­u­ing dis­clo­sure under­tak­ing (com­mon­ly referred to as Con­tin­u­ing Dis­clo­sure Agree­ments). Vol­un­tary dis­clo­sure infor­ma­tion is pro­vid­ed to give investors more time­ly infor­ma­tion regard­ing an issuer’s oblig­a­tions, finan­cial con­di­tion, or oper­at­ing performance.

• Best Practices

  Mar­ket­ing Munic­i­pal Bonds as Green, Sus­tain­able, Social, or Oth­er Alter­na­tive­ly Des­ig­nat­ed Bonds

  GFOA rec­om­mends that gov­ern­ments crit­i­cal­ly eval­u­ate the poten­tial ben­e­fits and asso­ci­at­ed costs of for­mal­ly des­ig­nat­ing bonds as hav­ing pos­i­tive social, envi­ron­men­tal, sus­tain­able or oth­er impacts. 

• Best Practices

  Debt Man­age­ment Policy

  The GFOA rec­om­mends that Gov­ern­ments adopt com­pre­hen­sive writ­ten debt man­age­ment poli­cies that reflect applic­a­ble local, state, and fed­er­al laws and reg­u­la­tions. The GFOA also rec­om­mends that Gov­ern­ments review their debt man­age­ment poli­cies peri­od­i­cal­ly for nec­es­sary updates.

• Best Practices

  Refund­ing Munic­i­pal Bonds

  Issuers should include guide­lines and cri­te­ria in their debt man­age­ment poli­cies that address when a refund­ing is per­mit­ted based on poten­tial debt ser­vice sav­ings or oth­er cri­te­ria, preser­va­tion of future refund­ing flex­i­bil­i­ty when issu­ing any new mon­ey debt, and mon­i­tor­ing of refund­ing oppor­tu­ni­ties on out­stand­ing debt.

• Best Practices

  Invest­ment and Man­age­ment of Bond Proceeds

  GFOA rec­om­mends that gov­ern­ments have an Invest­ment Pol­i­cy which takes into con­sid­er­a­tion all inher­ent risks, and which also includes spe­cif­ic poli­cies for the invest­ment of bond pro­ceeds to ensure that legal and reg­u­la­to­ry require­ments are met, fair mar­ket val­ue bids are received, and issuer objec­tives for var­i­ous uses of pro­ceeds are attained. This best prac­tice is focused on the invest­ment of bond pro­ceeds. For best prac­tices regard­ing a com­pre­hen­sive Invest­ment Pol­i­cy see the ref­er­ence list of GFOA best prac­tices below.

• Best Practices

  Post-Issuance Poli­cies and Procedures

  Issuers of bonds or oth­er debt oblig­a­tions should devel­op and adopt for­mal, writ­ten post-issuance com­pli­ance poli­cies and pro­ce­dures to assist in meet­ing com­pli­ance require­ments and in pre­vent­ing, iden­ti­fy­ing and cor­rect­ing pos­si­ble vio­la­tions that might occur dur­ing the term that bonds are outstanding.

• Best Practices

  Debt Ser­vice Pay­ment Procedures

  The GFOA rec­om­mends that gov­ern­ments estab­lish a plan for bud­get­ing, allo­cat­ing, and invest­ing debt ser­vice funds to ensure that prin­ci­pal and inter­est pay­ments are made time­ly, accu­rate­ly, and in a cost-effec­tive manner.

• Best Practices

  Man­ag­ing Build Amer­i­ca and oth­er Direct Sub­sidy Bonds

  Gov­ern­ments that issued BABs or oth­er direct sub­sidy bonds should be acute­ly aware of their ongo­ing respon­si­bil­i­ties asso­ci­at­ed with these bonds and be cog­nizant of Inter­nal Rev­enue Ser­vice (IRS) actions relat­ed thereto.