In the summer of 1998, Madonna’s Ray of Light album (her best) and Lauryn Hill’s debut album The Miseducation of Lauryn Hill had hit the air waves, Hanson (who?) and the Backstreet Boys were the big teen heartthrobs, and surfing the internet required … dial-up. The MSRB’s EMMA filing system didn’t exist back then.
In Georgia that summer, approximately 30 counties and cities entered into lease agreements with the Georgia Municipal Association to finance the acquisition of capital equipment. These lease agreements were pooled into a Georgia Local Government 1998A Grantor Trust that sold Certificates of Participation, Series 1998A (the “Series 1998A Certificates of Participation”) to bondholders. Each participating county/city executed a Continuing Disclosure Certificate (“CDC”) agreeing to provide its audited financial statements, its ad valorem tax digest, and other information (an “Annual Report”) by June 1 each year. Most local governments do not have their audited financial statement by June 1, and continuing disclosure obligations were not nearly as well understood or scrutinized back then as they are today.
Several counties and cities have been taken by surprise to learn, during preparation for a bond issuance, that this CDC existed and that they have been in noncompliance with this continuing disclosure obligation for all these years. This noncompliance must be disclosed in the official statement for the proposed bond issue. Further, for the underwriter to fulfill its duties under SEC Rule 15c2-12, the noncompliance should be remediated and a process established for complying with the CDC going forward.
Counties and cities that participated in the GMA lease program are listed on page 3 of the Official Statement related to the Series 1998A Certificates of Participation. Click on this link to view the Official Statement or you can search EMMA for all related filings using CUSIP 373271. If your county or city is on the list and you are not familiar with this continuing disclosure obligation, you might be in noncompliance. Consult with bond counsel to resolve this potential problem well before your next bond issue.