Continuing Disclosure Requirements for California School District Bonds
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After the issuance of general obligation bonds, school districts are obligated to update and/or disclose important information to investors as long as the financing remains outstanding. These ongoing disclosures are required under Rule 15c2-12 (the “Rule”) of the Securities Exchange Act of 1934 and apply to publically-sold primary offerings with an aggregate principal amount of $1,000,000 or more. The Rule was adopted in an effort to improve the quality and timeliness of disclosures to investors. Under the Rule, there are two primary reporting requirements for school districts: the filing of an annual report and the filing of material event notices when necessary. The required information to be included in the annual report and what qualifies as a material event notice can be found in the Continuing Disclosure Certificate (typically as an appendix) in the Official Statement of a financing.
The filing deadline for annual reports varies from financing to financing but typically is due at the end of March each year. The required information also varies, but the most common requirements are the district’s audited financial statements for the most recently completed fiscal year, adopted budget for the current fiscal year, current assessed value, secured tax charges and delinquencies, and the top 20 taxpayers within the district’s boundaries. Districts should check the Continuing Disclosure Certificate in the Official Statements of their outstanding financings to ensure that all the required information is included in their annual reports and filed in a timely manner.
Material event notices are required to be filed within 10 business days of a material event occurrence. Such events may include rating changes, defeasances, adverse tax opinions, defaults, bond calls, draws on debt service reserves, and an incurrence of a financial obligation, among others.
The annual report and material event notices must be posted on the Municipal Securities Rulemaking Board Electronic Municipal Market Access website (known as EMMA). Failure to file the required items must be disclosed in future financing documents for a period of five years.
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